Sensex logs 2nd biggest single-day gain of 2022: Key factors behind stock market rally

NEW DELHI: Domestic equity indices closed higher on Tuesday as buying interest was seen across all sectors. The major gains were led by the banking and financial stocks.

The market capitalisation of all listed companies on BSE jumped Rs 5.65 lakh crore to Rs 280.21 lakh crore from Rs 274.56 lakh crore on Monday as the 30-share Sensex advanced 1,564.45 points --- the second biggest point-wise gain of this year-- to end at 59,537.09. Its broader peer, Nifty50, ended the session comfortably above the 17,750 mark. Nifty has gained 3.4 per cent this month, rising 2.6% today itself.

Bajaj Finserv was the top gainer from the 30-share pack, rising nearly 5.47 per cent to Rs 16,965. Bajaj Finance rose 4.86 per cent, followed by IndusInd Bank, up 4.15 per cent, and Tech Mahindra, rising 3.96 per cent. ICICI Bank, Kotak Mahindra Bank and Tata Steel rose 3.72 per cent, 3.46 per cent and 3.29 per cent, respectively.


Earlier in the day, Asian markets settled mixed as South Korea’s Kospi and Japan’s Nikkei 225 rose 0.99 per cent and 1.14 per cent, respectively. China’s Shanghai Composite index fell by 0.42 per cent.

Sectorally, the Nifty Financial Services index added 3.42 per cent, while Nifty Bank added 3.29 per cent. Nifty IT and Auto also settled higher. Nifty Midcap50 and Smallcap50 advanced 1.92 per cent and 1.16 per cent, respectively.

Here are the factors that contributed most to the market rise:

• Strong buying in banking stocks

While Tuesday's rise in key indices was broad-based, a few BFSI stocks namely HDFC Bank, ICICI Bank, Bajaj Finance, HDFC and SBI contributed over 250 points positively to the index rise. Other BFSI stocks also gained. Bajaj Finserv was trading 3.98 per cent higher at Rs 16,730. IndusInd Bank, Bajaj Finance and SBI gained 3 per cent each and were among the top five gainers on the index. Axis Bank, Kotak Mahindra Bank, HDFC Bank and ICICI Bank rose up to 1.6 per cent.

• Positive S&P500 futures

After a steep fall in US stocks in the last two sessions, S&P500 futures were trading marginally higher, suggesting a flat to a positive start for US stocks later in the day. In his speech on Friday, Powell sent a short and direct message that there won’t be a Fed pivot anytime soon, which has markets positioned for further equity weakness, said analysts.

"Investors were expecting that once the US got some ugly data, perhaps a couple of negative NFP reports, that the Fed would come to the rescue, but that might not be the case," Edward Moya, Senior Market Analyst, The Americas OANDA. A recovery in S&P500 futures suggests the market is factoring in the development.

• Drop in oil prices

Oil prices dipped on Tuesday, paring some gains from the previous session, as the market feared that more aggressive interest rates hikes from central banks may lead to a global economic slowdown and soften fuel demand, Reuters ported.

Brent crude futures for October settlement dropped 56 cents, or 0.5 per cent, to $104.53 a barrel, after climbing 4.1 per cent on Monday, the biggest increase in more than a month. The October contract expires on Wednesday and the more active November contract was at $102.57, down 0.4 per cent.

• Dollar off 20-year high

The dollar index, which tracks the greenback against a basket of six major world currencies, was hovering near 108.70 after hitting a 20-year high in the previous session, thanks to the strengthening euro. Dollar and equity share an inverse relationship.

The Indian rupee was trading higher against the dollar, helped by foreign equity inflows and a pullback of the dollar index. The domestic currency stood at 79.81 per dollar, after closing at 79.9625 in the previous session. Foreign investors have poured in about $6 billion into Indian equities this month, the biggest inflow since December 2020.

• Technical factors

Nifty50 had 17,350-17,400 range as the immediate resistance zone, which it easily breached easily in Tuesday's trade.

The index recovered and is flirting with its 20 day-SMA, which on Monday stood at 17,549. The 20-day SMA had offered some support to the index in the recent fall, but the level was breached in the previous day's fall. A breach of this level on a closing basis may offer some comfort to investors. "Unless Nifty50 closes above 17,550 all the pullback attempts shall remain vulnerable for a sell off," said Mazhar Mohammad of Chartviewindia.in said yesterday.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)