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Sensex's 1,200-point rally adds Rs 5 lakh crore to investor wealth. Key reasons

Sensex's 1,200-point rally adds Rs 5 lakh crore to investor wealth. Key reasons

As financial stability risks are growing, investors are starting to doubt whether central banks globally will stay aggressive in fighting inflation, analysts said. 

Investor wealth as suggested by the BSE market capitalisation, jumped Rs 4.6 lakh crore to Rs 272.85 lakh crore.    Investor wealth as suggested by the BSE market capitalisation, jumped Rs 4.6 lakh crore to Rs 272.85 lakh crore.   

From Tokyo to Mumbai, stocks in Asia soared on Tuesday morning, mirroring a solid overnight rally at Wall Street. Stocks gained as hopes that the US Fed may do away with monetary tightening amid signs of weakening economy sent US treasury yields tumbling. 

As financial stability risks are growing, investors are starting to doubt whether central banks globally will stay aggressive in fighting inflation, analysts said. 

"First we almost had a gilt market crash and now Credit Suisse is struggling with capital concerns," said Edward Moya, Senior Market Analyst, The Americas OANDA. 

At home, investor wealth as suggested by the BSE market capitalisation, jumped Rs 4.6 lakh crore to Rs 272.85 lakh crore from Rs 268.26 lakh crore, aided by over 1,200 points rally in Sensex earlier today.  

Also Read: Adani vs Reliance vs Tata: Which group delivered better return in 2022 so far?

Here's are the key reasons behind Tuesday's strong rally:

Wall Street stocks rebound
In overnight trade, the Dow Jones Industrial Average surged 765.38 points, or 2.66 per cent to settle at 29,490.89. The broader S&P500 index climbed 92.81 points, or 2.59 per cent, to 3,678.43. Nasdaq Composite also jumped 239.82 points, or 2.27 per cent, at 10,815.44.

The US 10-year bond yield last stood at 3.62 against a recent high of 4.019 level on September 28. 

Moya said it is premature to say that the US Fed is almost done with tightening, "but it seems Wall Street is growing confident that they could be done in December."

Asia markets follow the suit
India was not lone gainer. In fact markets across Asia cheered the Wall Street rally. At the time of writing this report, Japan's Nikkei was up 2.83 per cent at 29,935. South Korea's Kospi gained 2.39 per cent to 2,207. Taiwan's key index was also up 2.10 per cent. Markets across Australia and New Zealand rallied up to 3.75 per cent. Markets in China and Hong Kong were shut for the day.      

Dollar index eases a bit
Dollar shares inverse relation with equities. Data showed Dollar index, which measures the value of the greenback against a basket of six major world currencies, has eased some 2 per cent in the last five sessions to 111.59 level on Tuesday. The same index is up 16.31 per cent so far in 2022.

"The ‘risk-off, risk-on’ texture of the market is in response to fast changing economic and market signals. For now, the market sentiment has turned positive with declining trend in dollar and US bond yields. If this trend continues FPIs will again turn big buyers in India," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Oil price gains muted after 5% jump 
After rallying over 5 per cent in the previous session, oil prices did not see any further surge in Tuesday's trade. US crude futures added 22 cents, or 0.3 per cent, to $83.85 a barrel in Tuesday's trade, as per Reuters, after rallying more than 5 per cent in the previous session.

Ravindra Rao, VP- Head Commodity Research at Kotak Securities said even as crude prices have risen on OPEC+ production cut expectation, one needs to keep a watch on the production targets by OPEC+ which is lagging behind. 

"A fall in Dollar index has also supported the oil bulls and any reversal in the index might cap the gains in oil,” he said.

Published on: Oct 04, 2022, 11:15 AM IST
Posted by: Amit Mudgill, Oct 04, 2022, 10:58 AM IST