Sensex, Nifty rise in early trade; YES Bank, Sun Pharma, Kotak Bank top gainers

The Sensex and Nifty started on a positive note on Thursday led by gains in banking and capital goods stocks. While the Sensex rallied 114 points to 37,866 in early trade, the Nifty climbed 30 points to 11,372. YES Bank (2.54%), Sun Pharma (1.21%) and Kotak Bank (1.12%) were the top Sensex gainers.

Top Sensex losers were Hero MotoCorp (1.43%), Tata Motors (1.02%) and Bajaj Auto (0.83%).

On Wednesday, the 30-share Sensex closed higher for the third straight session. The 30-share BSE index ended 216.51 points, or 0.58 per cent, higher at 37,752.17. The broader NSE Nifty closed with gains of 40.50 points, or 0.36 per cent, at 11,341.70.

Meanwhile, the mid cap and small cap indices were trading 38 points higher each in early trade. While the midcap index was trading at 15,073, the small cap index was trading at 14,857 level.

The midcap index has seen 1279 points rise since February 18. Similarly, the small cap index has risen 1740 points during the same period.

Rahul Agarwal, Director, Wealth Discovery EZ Wealth said, "Midcap and Smallcap stocks which had seen massive correction in FY2018 are seeing some renewed optimism since mid February, the enthusiasm for stocks in this category is reflected in the benchmark Midcap and Small cap indices which are sharply up by almost 10 percent. Both these indices have significantly outperformed their better-known peers, the Sensex and the Nifty.

The primary reason behind the rally can be attributed to the attractive valuations at which the stocks were trading prior to the rally. Even after the sharp uptick midcap and small cap stocks are trading at valuations that are similar to or marginally lower than the levels seen in 2014 wherein the first legs of the midcap bull-run started.

In addition, improving macro-economic environment, de-escalation at the border and renewed optimism about the current dispensation being able to make a comeback at the Center are some of the reasons that are fuelling the rally.

This ongoing rally may take a break in the immediate near term given the sharp nature of the bounce. However, we believe that the positive momentum will consolidate and a sustainable positive trend will develop which will further get strengthened after the results of the General elections are out in early May.

The recovery though, will not be V-shaped and would be more dependent on individual stocks, which we expect can bounce between bounce 20-30 percent, the historical highs that we had witnessed prior to the meltdown however would still be elusive and can not be expected for a very long time."

Market breadth was positive with 925 stocks trading higher compared to 560 falling on the BSE. Capital goods and banking stocks led the gains with their indices rising 113 points and 164 points, respectively.

On a net basis, foreign portfolio investors (FPIs) bought shares worth a net of Rs 2722 crore on Wednesday, and domestic institutional investors (DIIs) were net sellers to the tune of Rs 1508 crore, provisional data available with BSE showed.