Barring three companies, all Index members ended the session in green, with HCL Technologies, Tata Motors, Mahindra & Mahindra and Bajaj Auto gaining between 4% and 6.4%. Heavyweights – Reliance Industries and HDFC Bank – contributed 38% to the Sensex gain. The two together enjoy a weightage of about 2s3% in the basket of 30 stocks.

Foreign investors, once the driving force of Indian equities, have been cutting their exposure ever since the government proposed a higher tax on overseas funds structured as trusts. Since the Budget announcement, FPIs have sold Indian equities in all the sessions except three, offloading shares worth $2.8 billion, Bloomberg data showed.

Provisional data from the exchanges showed FPIs sold around $62 million worth of stocks on Thursday. The Sensex rallied as much as 715 points intra-day, before settling at 37,327.36 points, up 636.86 points or 1.7%. The broader Nifty surged 176.95 points or 1.6% to close at 11,032.45. Both the indices clocked their biggest single-day rally in nearly three months and investors got richer by Rs 1.93 lakh crore to Rs 140.76 lakh crore.

However, the broader market has been in a bearish mode for more than six quarters now; the number of companies with a market capitalisation of Rs 1,000 crore or more has fallen to 679 on Thursday from the peak of 853 in Q3FY18. That is despite the fact that FPIs were buyers in every month between February and June and indicates that the benchmark indices have been held up by the rise in just a bunch of stocks, masking the weakness in the rest of the market.

According to Morgan Stanley, Indian equities look attractive in a relative context amid subdued oil prices, global trade tensions and better relative valuations in what is a low-return world. “Policy action is still needed to protect India’s relative performance, which has sunk since the Union Budget,” Morgan Stanley said in an investor note.

Among emerging markets, India has witnessed the highest foreign outflow in July, followed by an outflow of $616 million from Taiwan. While South Korea attracted an investment of $1.6 billion, Thailand saw an inflow of $653 million.

At 37,327.36, the Sensex trades at a price-earnings multiple of 17.5 times one-year estimated forward earnings, higher than the 10-year forward earnings average of 15.7 times. This compares with 10.6 times for Kospi and 14.8 for Jakarta Composite. Russian and Turkish equities were the cheapest among the emerging markets with a forward price-to-earnings ratio of 5.6 and 5.8, respectively, Bloomberg data showed.

All of the 19 sector indices on the BSE gained value on Thursday, with the BSE Energy rising as much as 3.2%, while BSE Auto surged 2.8%, BSE Tech, BSE IT and BSE Oil & Gas rose nearly 2%.