Markets post best daily gains in three months; Sensex, Nifty soar nearly 3%

China rate cut helps improve sentiment

Indian markets on Friday recouped all the losses made in the previous session amid a global sell-off on fears of a recession. The rebound was triggered by China’s decision to cut a key lending benchmark to support its economy.

The Sensex surged 1,534 points, or 2.9 per cent, to settle at 54,326, a day after the index had closed at its lowest level since July 30, 2021. The Nifty50 index jumped 457 points, or 2.9 per cent, to close at 16,266. Friday’s gains were the second biggest for the indices this year, and the most since February 15.

Shares of Reliance Industries (RIL) shot up 5.8 per cent after rumours it was planning to list its telecom and retail subsidiaries, accounting for more than a fourth of the index gains. A Reliance spokesperson did not comment on the listing.

“The market displayed a confident yet calm rally throughout the day, supported by fortified global markets, especially the Asian. The Chinese central bank cut a key interest rate to support growth, injecting optimism into emerging markets. With concerns over an economic slowdown and rate hikes across the globe, investors will continue to invest with caution. Value stocks should do well during this consolidation period,” said Vinod Nair, head of research at Geojit Financial Services.

Friday’s rally helped the markets post their first weekly gains in six weeks. In the previous six weeks, the benchmark indices had plunged over 10 per cent amid sustained selling by foreign portfolio investors (FPIs). Market players said oversold conditions and short-covering aided the rally even as concerns remain around rising inflation, monetary tightening, and the war in Ukraine. 

FPIs continued to be net sellers on Friday and pulled out 1,265 crore from the domestic market.

China cut its five-year loan prime rate, which influences the pricing of mortgages, by 15 basis points on Friday, as authorities sought to cushion the impact of an economic slowdown. It, however, left the one-year LPR unchanged.

“This week, the market swung sharply in both directions, with the Nifty moving in a 660-point range. The index has managed to stay above 15,740 levels. However, follow-up buying was seen missing at higher levels as the Nifty was unable to sustain above 16,300. Overall, we expect this volatility to continue next week as well with several macro headwinds like high inflation and aggressive interest rate hikes. Also, heavy FPI selling continued, which added to the overall pressure in the market,” said Siddhartha Khemka, head — retail research, Motilal Oswal Financial Services.

FPIs have pulled back heavily from the domestic market amid global growth concerns. So far in May, they have sold shares worth nearly Rs 40,000 crore, taking their year-to-date selling tally past Rs 1.6 trillion.

All 30 Sensex components ended with gains on Friday. Dr Reddy’s gained the most at 8.1 per cent, followed by RIL. All the 19 sectoral indices of the BSE ended with gains. The BSE Metal index jumped nearly 4 per cent, while the BSE IT index underperformed with just 1.53 per cent gain.