Indian equity indices extended their gains for a third consecutive session on Monday, with domestic benchmarks rising more than 1.6 per cent each. The 30-share BSE Sensex pack surged 1,233.25 points or 1.66 per cent to close at 75,692.78, while the NSE Nifty index advanced 387.70 points or 1.68 per cent to settle at 23,440.80.
On the sectoral front, energy, metal and automobile stocks led the gains, while IT and pharma shares ended lower. The broader market also participated in the rally, with midcap and smallcap indices rising between 0.71 per cent and 1.19 per cent.
The rally added significantly to investor wealth. The total market capitalisation (m-cap) of BSE-listed companies increased by around Rs 7.92 lakh crore to Rs 482.29 lakh crore, compared with Rs 474.37 lakh crore in the previous session.
Ajit Mishra, SVP – Research, Religare Broking, said favourable global cues, easing crude oil prices and encouraging corporate earnings supported investor sentiment.
"Markets staged a rally on Monday, extending their recovery as favourable global cues, easing crude oil prices and encouraging corporate earnings lifted investor sentiment. The Nifty moved above the 23,400 mark, while the Sensex advanced nearly 1,200 points, reflecting broad-based buying interest," Mishra stated.
He noted that Brent crude eased towards $110 per barrel from its recent high of around $118, as renewed diplomatic discussions involving Iran and Qatar raised hopes of de-escalation in West Asia and eased concerns over potential supply disruptions.
Encouraging corporate earnings and signs of renewed foreign investor interest also supported the market, Mishra added. However, he cautioned that crude prices remained elevated and geopolitical developments would continue to influence domestic market sentiment and the broader macroeconomic outlook.
Investor sentiment also received support from reports of proposed capital gains tax relief for foreign investors.
The Securities and Exchange Board of India (Sebi) has recommended that the government remove the long-term capital gains (LTCG) tax imposed on foreign investors, Reuters reported, citing sources. The regulator has also proposed tax relief for domestic mutual fund investors by suggesting an exemption from LTCG tax when they sell existing mutual fund holdings to reinvest the proceeds in new schemes.
Global brokerage Jefferies, in a recent note, said that any reduction in capital gains taxes could improve the attractiveness of Indian markets for foreign investors and support portfolio inflows.
Currently, investors pay long-term capital gains (LTCG) tax of 12.5 per cent on securities held for more than a year and short-term capital gains tax of 20 per cent. These are in addition to securities transaction tax (STT) on trades and withholding taxes on dividends.
"If and when this happens, it is likely to be viewed largely as a positive development. However, we will have to wait for the final announcement, which could form part of the Budget, as its presentation is about two months away," Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services (MOFSL), told Business Today.
Nandish Shah, Deputy Vice-President at HDFC Securities, said, "For Nifty, 23,175 is now likely to act as immediate support. With momentum turning positive, the index is now heading toward the next resistance zone of 23,500–23,600. A sustained move above this band could open the door for further upside, while holding above 23,175 would keep the bullish bias intact."