Markets bounce from Evergrande-led selloff, Sensex ends 514 points up

Post global cues, rebound in metal, realty stocks improves investor mood

The benchmark equity indices bounced back after falling in the previous two sessions as investors looked to shrug off the fears of contagion from a potential collapse of China’s Evergrande. Shares of metal and real estate companies saw a sharp rebound improving investor mood. Most global markets also rallied even as investors remained cautious ahead of the US Federal Reserve policy meeting.

Experts said the concerns surrounding real estate firm Evergrande's debt crisis moderated which led to an improvement in risk appetite.

The benchmark Sensex on Tuesday ended the session at 59,005, a gain of 514 points or 0.8 per cent. The Nifty, on the other hand, ended the session at 17,562, a gain of 165 points or 0.95 per cent. In the previous session, the indices had fallen by an equal measure rattled by debt woes in China.

"Domestic benchmark indices witnessed sharp recovery mainly led by a brisk rebound in defensive sectors like IT, pharma and FMCG. Further, Nifty metal also witnessed strong rebound as investors utilized steep corrections in metals stocks as an opportunity to buy in dips," said Binod Modi, head strategy, Reliance Securities.

The BSE Realty index rose 3.5 per cent amidst value buying after two days of decline following signs of a rebound in sales for home builders and the easing of Covid-19 restrictions.

"Global stocks recovered from the fears sparked by troubles in the Chinese economy ahead of the US Fed meeting that will start later in the day. All major sectors traded in the green zone while the auto sector remained under pressure due to rising input costs and the semiconductor shortage faced by the global auto industry," said Vinod Nair, head of research, Geojit Financial Services.

Going forward, experts said investors would be keenly watching the US Federal Reserve's meeting on Tuesday and Wednesday, where the central bank is expected to come up with a roadmap on tapering its bond-buying programme. Investors are also keeping tabs on central bank meetings in dozens of other countries as they are assessing risks associated with the prospects of reduced central bank support.

This week investors had to grapple with many concerns ranging from stretched equity valuations, slower than expected resumption of economic activity due to concerns surrounding delta virus strain, and the fall in commodity prices. Markets are also digesting an outlook of reduced central bank policy support.

"Today's recovery in equities shows that markets have discounted possible fallout from the likely default of Chinese real estate giant Evergrande, while Thursday would be crucial as $83 million interest payment is due for Evergrande. However, considering increasing possibility of earnings downgrade in the USA markets following sharp rise in Coronavirus daily caseload and continued reform measures undertaken by the government in India have revived FIIs' interest in the domestic market," Modi said.

The market breadth was slightly negative, with 1,700 stocks declining and 1,528 advancing. One hundred and sixty-nine stocks hit their 52 week high, and 286 hit the upper circuit.

Bajaj Finance was the best performing index stock and rose 5 per cent, IndusInd rose 4.3 per cent, and ITC rose 3.36 per cent.  Barring four, all the sectoral indices gained. Realty and Metal stocks gained the most, and their gauges gained 3.5 and 2.6 per cent, respectively.

(with agencies inputs)