Sensex shrugs off India-China flareup, rises 376 points on firm global cues

Mumbai: Domestic benchmark indices rebounded sharply on Tuesday to end in the green after briefly slipping into the negative territory as investors focussed on firm cues from global markets, discounting escalation in border flareup between India and China.

Chinese troops have killed three Indian soldiers, including the Commanding Officer of a battalion at Galwan valley in a violent faceoff on Monday night, heightening tensions on the border to such levels since 1975, when four Assam Rifles troopers had been ambushed.

"The border dispute between India and China resulted in volatility in the stock markets, on tensions of further escalation of dispute. This was in spite of steady global markets following the announcement of the US Fed reserve’s expanded bond-buying program,” said Vinod Nair, head of research at Geojit Financial Services.

“Investors seem to have set aside the news emerging from the border and are still hoping on the fact that liquidity will keep propping the markets, for the time being. India can ill-afford another battlefront since it is still battling the virus pandemic,” Nair added.

While Sensex rose as much as 793 points in early trade, it slipped into the red as news of border skirmish came in, but managed to recoup the losses and closed 376 points higher, led by gains in financial stocks. Peer Nifty index closed 100 points higher at 9,914.

Half of 30 Sensex stocks closed in the green. Top lender HDFC Bank continued to contribute the most to benchmark’s gains as it advanced 4.16 per cent. Mortgage lender Housing Development Finance Corporation (HDFC) rose 4.03 per cent. Peer lender ICICI Bank climbed 3.60 per cent. On the other hand, cigarettes-to-hotels business ITC shed 1.20 per cent.

Even as frontline indices advanced, the market breadth titled towards the bears. The declining shares beat advancing ones in the ratio of 1.2:1 on the BSE.

Broader markets underperformed, with BSE mid and small cap indices rose only 0.37 per cent and 0.04 per cent, respectively.

BSE Finance index was the top sectoral gainer as it advanced 2.39 per cent. BSE Bankex followed with a 1.95 per cent gain. On the other hand, BSE Telecom was the biggest sectoral loser as it dropped 1.46 per cent.

Automobile major Tata Motors tumbled 5.67 per cent due to the border tensions between India and China. The company’s Jaguar-Land Rover unit has significant exposure to China.

Retail chain Shoppers Stop shed 5.30 per cent after it reported a consolidated loss of Rs 127.22 crore for the fourth quarter ended on March 31, with the coronavirus pandemic taking a toll on its operations.

The near-term direction for the market was uncertain.

“The stand-off between India and China at LAC will also be on investors' radar and any further escalation could negatively impact the markets,” said Ajit Mishra, VP - Research, Religare Broking

“On the index front, a decisive breakout above 10,050 in Nifty can only trigger a fresh up move else consolidation will continue. We reiterate our view preferring hedged bets in the present,” said Mishra.

MARKETS AT A GLANCE

• Sensex up 1.13%, or 376 points to close at 33,605
• Nifty rises 1.02%, or 100 points to close at 9,914
• 15 of 30 Sensex stocks close higher
• Top Sensex gainers: HDFC Bank up 4.16%, HDFC 4.03%, ICICI Bank 3.60%
• Top Sensex losers: TechM down 2.75%, Axis Bank 2.03%, IndusInd Bank 1.80%
• Market breadth favours losers; advance-decline ratio at 1:1.2
• Broader markets underperform; BSE midcap index up 0.37%, BSE small cap 0.04%
• BSE Finance index tops gainers, up 2.39%; Dhanlakshmi Bank up 20%, Alankit 10%
• BSE Bankex up 1.95%; HDFC Bank, ICICI Bank lead gainers
• BSE Telecom top loser, drops 1.46%; HFCL down 5%, MTNL 4.61%
• Tata Motors skids 5.67% on India-China border woes
• Shoppers Stop sheds 5.30% on Q4 loss due to Covid-19 impact
• FIIs pump in $2.9 bln in June so far, DIIs pull out Rs 923.69 cr

WHO MOVED MY MARKET

• Firm world markets

Global stocks advanced alongside US equity futures as plans for more American stimulus revived investor sentiment, Bloomberg reported adding a gauge of European corporate debt risk fell the most in two months. The Stoxx Europe 600 Index advanced 2.3 per cent as of 10:52 a.m. London time. Futures on the S&P 500 Index advanced 1.1 per cent. The MSCI Emerging Market Index jumped 2.2 per cent. Talk that U.S. firms may be allowed to work with China’s Huawei on new 5G standards eased trade jitters, and a report of a new $1 trillion U.S. infrastructure programme also boosted markets, Reuters reported.

• Indo-China border tensions

Three Indian soldiers were killed during a "violent face-off" with Chinese troops along the countries' de facto border in the Himalayas late Monday, the Indian army said in a statement.

• Continued surge in coronavirus cases

India witnessed sharpest jump in coronavirus death toll as it recorded 380 fatalities in the last 24 hours, taking the causalities to 9,900. Fresh infections from the virus saw a slight dip on Monday. As many as 10,667 new cases were confirmed in the last 24 hours. The total number of coronavirus patients in the country increased to 343,091.

WHAT TO WATCH OUT FOR

• Indo-China border developments will be in focus.

• The sharp rise in new coronavirus cases are a big cause of concern, as the country is in the first phase of easing the strict lockdown restrictions.

• Global market movements will be closely followed, as the domestic market tends to follow suit.