Five reasons for the 900-point rally in the S&P BSE Sensex on Tuesday

All the Nifty sectoral indices are trading in the green. Nifty Bank, Nifty Financial Service, Nifty Metal, and Nifty Private Bank indexes gained over 2 per cent each

Indian equity markets shrugged off the Budget blues and rallied over 2 per cent on Tuesday. The benchmark indices opened gap-up and rode the momentum to nearly the pre-Budget levels on across-the-board buying. Investors' wealth rose by over Rs 2.34 trillion in the session to Rs 156.10 trillion in noon trades, BSE data shows.

The benchmark S&P BSE Sensex gained over 900 points in intra-day trade and the broader Nifty50 index was up nearly 270 points, inching close to the 12,000 mark. 
 

"Stocks trading near their 52-week high and are witnessing good volumes and could still provide decent returns in the near-term. Traders should look to capitalise on such opportunities. The immediate support for the Nifty is in the range of 11580-11660. The index faces resistance around 11800 and 11930 levels,” says Sameet Chavan, chief analyst - technical and derivatives market at Angel Broking.

Here are the key reasons for today's market rally:

Global markets recover

Asian stocks bounced on Tuesday with Chinese markets reversing some of their previous plunge amid official efforts to calm virus fears. China’s central bank has flooded the economy with cash while trimming some key lending rates, although analysts suspect more will have to be done to offset the economic fallout from the coronavirus.

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MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1 per cent, led by gains in South Korea and Australia. Japan’s Nikkei inched up 0.1 per cent. In overnight trade, Wall Street took comfort in a surprisingly solid reading of US manufacturing and the Dow ended Monday with a rise of 0.5 per cent, while the S&P 500 gained 0.7 per cent and the Nasdaq 1.3 per cent. The Indian indices had followed the global markets' plunge during the initial coronavirus scare and the recovery worldwide also help sentiments of investors back home.

Budget hangover gone

After the initial knee-jerk reaction on Saturday when the government presented the Budget for financial year 2020-21 (FY21), the Sensex had tumbled nearly 1,000 points. While most analysts remain disappointed with the Budget 2020 saying that the proposals lacked stimulus to revive the economy, the markets, too, have come to terms with the announcements. 

"The market's initial reaction was because they were hoping for some big bang reform that never came. But the view is that overall the Budget wasn't anti-market. Moreover, the finance minister has made conditions very lucrative for global investors to invest in India, especially in the infrastructure space. If that happens, it will help revive the economy in a big way," said independent market expert Ambareesh Baliga.

Borad-based buying

Buying across the board, especially in index heavyweights such as Reliance Industries, HDFC and HDFC Bank, ITC and Hero MotoCorp lifted sentiment. After hitting a fresh 52-week low on Budget proposals, ITC gained over 3% on Tuesday to Rs 214 levels. On the other hand, RIL moved up over 2.5 per cent in intra-day deals. Technical charts suggest more headroom for the counter, if it able to take out Rs 1,500 mark in the days ahead on good volume. READ MORE ON RIL HERE

Crude oil prices fall to a 13-month low

Oil prices fell to the lowest in more than a year on Monday, dragged down by concern over demand in China after the coronavirus outbreak. Brent crude was down $1.82 at $54.80 a barrel by 11:33 a.m. EST (1633 GMT), the lowest since January last year. As per a Reuters report, the world's biggest crude oil importer, refiner Sinopec Corp, plans to cut throughput in February by about 600,000 barrels per day (bpd), or 12 per cent, the steepest cut in more than a decade. READ MORE ON OIL HERE

Manufacturing PMI hits 8-year high in January

Investor sentiment also got a fillip from the manufacturing sector rising to an eight-year high in January. The widely-tracked IHS Markit India Manufacturing purchasing managers’ index (PMI) rose from 52.7 in December to 55.3 in January, its highest level in just under eight years. Since the growth was driven by a sharp rise in new business orders amid a rebound in demand conditions, it is being seen as potential green shoots of economic revival. READ MORE HERE