Goldman Sachs upgrade: The immediate trigger for the sharp rise in markets was an upgrade by global investment bank Goldman Sachs, which raised India to "overweight" from "market-weight" citing growth recovery and moderation in inflation going ahead. Goldman set its Nifty target at 6,600 points by December 2013, lifting sentiments on the Street. Goldman's 2013 target implies a 14 per cent jump in Nifty over the next 12 months.
Global cues: World markets gained after U.S. House of Representatives Speaker John Boehner voiced optimism that Republicans could broker a deal with the White House to avoid a $600 billion crunch of spending cuts and tax hikes dubbed the "fiscal cliff". Japan's Nikkei share average rebounded from the previous session's one-week closing low today. European shares also traded higher.
Parliament logjam ends: The four-day logjam in Parliament ended today after the government agreed to a vote on its decision to open up the retail sector to foreign players in India. The debate will begin on Tuesday in the Lok Sabha, with voting likely the next day. A vote will also take place in the Rajya Sabha.
S.V. Prasad, chairman of Chime Consulting told NDTV the UPA government is showing some spine and has sent a message that there is no difference between the government and the party.
Liquidity driven rally: Foreign funds have shown no signs of ebbing even though domestic investors continue to sell in Indian equities. Foreign institutional investors have so far bought equities worth nearly $20 billion in this calendar year.
Prashanth Narayan, VP & head (PMS Investments) of ING Investment Management said markets have gained on the back of sustained foreign liquidity flows.
Economy has bottomed out: The government is likely to struggle with its new fiscal deficit target after the 2G auction flop and there are lots of ifs in terms of situations to happen for the economy to revive, Mr Narayan said. However, many of the factors such as rate cycle and inflation may have peaked out, he said, adding that other weak data points like factory output seem to have bottomed out. As a result, the threat of a ratings downgrade might have been thwarted in the near term. On Tuesday, ratings agency Moody's maintained India's rating outlook at stable.
(With inputs from Thomson Reuters)