Equity market benchmark Sensex and Nifty recorded 2.3% gains each on Tuesday's trade led by gains in index heavyweights. BSE 30-share S&P Sensex closed 917 points higher at 40,789 and NSE 50-share index Nifty50 climbed 271 points higher at 11,979. This was the biggest single-day rise for the Sensex since September 23, 2019.
Market breadth was strong as the wider market participated in the rally. The broader markets BSE-Midcap and BSE-Smallcap underperformed the benchmark but still ended higher by 1.3%-1.4%.
All the sectoral indices recorded healthy gains with Oil & Gas, Metals and Consumer Durables recording the highest in the range of 3.1-3.5%. Midcap and Smallcap index gained 1.29%-1.37% respectively.
Santosh Meena, Senior Analyst, TradingBells said, "Today's rally can be attributed to a sharp fall in crude oil prices, positive global market, and a serious short covering. There was pessimism in the market post-budget with worries of coronavirus and the market has a habit to surprise by a rally in the mood of pessimism."
1. Profit booking
Indian bourses tanked on Saturday after the Budget didn't live up to Dalal Street's expectations. With the Budget overhang gone, investors are breathing a sigh of relief and are back to making fresh calls. In terms of BSE Sensex, the index closed 136 points higher at 39,872 yesterday and ended at the hike of 917 today, totalling to 1,053 points of the rise in mere 2 sessions post-budget.
"Indian bourses tanked on Saturday after the Budget disappointed the Street's expectations. However, as the Budget failed to provide any short-term relief, the market experienced massive carnage. This was a knee jerk reaction but as investors realized that the budget will aid in the long-term growth of the economy, the market picked up. With the Budget overhang gone, investors are breathing a sigh of relief and are back to make fresh calls," said Umesh Mehta, Head of Research, Samco Securities.
2. Global indices rise
Domestic market started 400 points higher, led by positive global cues and declining oil prices today and continued a bullish momentum. Globally, stocks were reversing some of the previous coronavirus-related plunge led by gains in China's Shanghai Composite today.
After plunging nearly 9% on Monday, Shanghai Composite rose 1.35% higher today after China said it would welcome assistance from the United States. Further, China's central bank flooded the economy with cash while trimming some key lending rates. This too led investors into a buying spree in international markets.
"A global rally in equities post a correction due to the Corona Virus had a positive rub off in India as well today with the BSE Sensex gaining more than 900 points with all sectoral indices ending in green," said S Ranganathan, Head of Research at LKP Securities.
3. January auto sales
Auto shares traded higher today after reporting January sales figures, which were better than street estimates. Shares of Hero MotoCorp rose 2.35% higher today, followed by Motherson Sumi Systems, Bharat Forge, Apollo Tyres and MRF that traded over 1% each. TVS Motor Company, Amara Raja Batteries, Bosch, Mahindra & Mahindra and Exide gained in the range of 0.50% to 1%.
Umesh Mehta, Head of Research, Samco Securities said, "January auto sales numbers were comparatively decent and with no other negative news, the Indian bourses saw a sudden rally today."
4. Metal, Banking stocks
Metal stocks traded higher today on the back of positive cues from China, which is the industry's largest importer. Hindalco and Tata Steel gained by 3.8% and 3.3%, respectively.
Banking shares also gained ahead of the RBI MPC meet which started today. S&P BSE Bankex gained 751 points or 2.19% intraday to 35,201, primarily led by gains in ICICI Bank, HDFC Bank and SBI.
"Banking sector led the rally today ahead of RBI policy on Thursday, there are expectations of no rate cut in upcoming policy but RBI may surprise by a rate cut amid growth concerns and falling crude oil prices, said Santosh Meena, Senior Analyst, TradingBells.
5. Brent Crude
Internationally, Brent crude, the global benchmark, fell to December 2018 low of USD 54 dollars a barrel, down nearly 25% from the peak it registered early last month when Iran-US tensions had escalated. This was on the back of coronavirus outbreak in China, which is one of the largest importers of crude in the world. Brent crude barrel traded higher by 0.40 per cent.
"A decline in oil prices and rupee appreciation is working in favour of the Indian markets. However, concerns regarding coronavirus still persist and we may witness volatility in the short-term", said Ajit Mishra, VP - Research, Religare Broking.