Sensex hits highest level since Feb 10 on hopes of Russia-Ukraine truce

The country’s benchmark indices surged over 1% on Wednesday as investor sentiment was lifted on the optimism around progress in talks between Russia and Ukraine. 

The Sensex rose 740 points, or 1.3 per cent, to end the day at 58,684, the highest since February 10. It was also the highest single-day gain for the index in two weeks. Meanwhile, the Nifty 50 ended the session at 17,498, a gain of 173 points, or 1 per cent. 

On Wednesday, both foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) were net buyers. The former purchased shares worth Rs 1,216, while the latter pumped in Rs 1,357 crore.

On Tuesday, Russia said it has reduced military activity around Ukraine's capital, Kyiv and Chernihiv. Vladimir Medinsky, Russia's chief negotiator, termed the move as one of two steps towards de-escalating the 34-day-old conflict.

"The market was looking for some good news, and de-escalation talks cheered investors. There was also some buying on account of the rejig in indices,” said UR Bhat, co-founder of Alphaniti Fintech.

However, there is considerable scepticism about Russia's de-escalation promise, with some terming it as a tactical retreat. Analysts said any gains in equity markets would remain fragile if the war drags on.

Brent crude prices rose on Wednesday to trade around $113.30 per barrel. While prices have come down lately, they are still at elevated levels, prompting oil marketing companies to hikes fuel prices.

The crude prices have come down amidst expectations of a fall in demand from China as Shanghai has imposed a phased lockdown to contain the Covid outbreak. However, concerns around supply side issues, as the Russia-Ukraine war drags on, have prevented prices from falling drastically.

Apart from the geopolitical tensions, markets are also grappling with higher raw material costs and central banks' unwinding of monetary support.

"China's Covid situation is a huge concern. China is the supplier to the world, and one needs to be worried if the outbreak is not contained,” said Bhat.

Quarterly results of companies, expected to kick in from next week, will give markets a sense of direction, said experts.

"The fourth quarter earnings remain critical at this juncture. Further, the number of downgrades/upgrades will have to be monitored (due to the higher input cost pressure), as it will drive market fundamentals. We continue to hold a positive long-term view on the market supported by the emerging favourable structure as increasing capex spending enables banks to improve credit growth,' said Neeraj Chadawar, head-quantitative research, Axis Securities.

The market breadth was strong, with 2,083 stocks advancing and 1,322 declining. More than two-thirds of the stocks in Sensex gained, with Reliance Industries being the biggest contributor to the gains. Realty stocks gained the most, and its sectoral index gained 1.5 per cent on the BSE. On the other hand, metal stocks declined, and its index was down 2.9 per cent.