Markets rebound as investors cast wide net for value; Sensex up 694 points

In-demand financial stocks drive the rally

Domestic markets recovered after closing at their lowest level in four months, as investors opted for value buying, judging recent losses to be excessive.

 

Attractively valued financial stocks led the gains, while metal stocks also emerged among the top gainers amid optimism regarding China.

 

The S&P BSE Sensex ended the session at 79,477, gaining 694 points, or 0.8 per cent. The National Stock Exchange Nifty closed at 24,213, up 218 points, or 0.9 per cent. Both indices posted their best single-day gain since September 20. The gains were broad-based, with 2,468 stocks advancing and 1,478 declining. The broader Nifty Midcap 100 rose by 0.6 per cent, while the Nifty Smallcap 100 increased by 0.4 per cent. 

 

 

The bulk of Sensex gains came from HDFC Bank, which rose by 2.6 per cent, and ICICI Bank, which increased by 1.5 per cent. Investors were attracted to banking stocks due to valuation comfort ahead of key events, such as the US presidential election and the Federal Reserve’s (Fed’s) monetary policy announcement this week.

 

The Nifty Bank, which tracks banking stocks, trades at a trailing 12-month price-to-earnings ratio of 13.7x, compared to its five-year average of 23.9x.

 

Gains in metal stocks like Tata Steel and JSW Steel were driven by hopes of a demand recovery in China after Premier Li Qiang expressed confidence that the country would achieve its 5 per cent economic growth target.

 

The domestic markets have declined nearly 8 per cent from their peak, with slowing corporate earnings and relentless selling by foreign portfolio investors (FPIs) weighing on sentiment.

 

“With two-thirds of Nifty 50 companies missing their earnings estimates in the second quarter, Nifty 50 earnings for 2024-25 have been drastically revised down to less than 10 per cent from the previous consensus of 15 per cent. Given this kind of earnings downgrade, it would be difficult to sustain the current valuations. This rationale underpins the persistent FPI selling, which might continue for some time,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.

 

As Vice President Kamala Harris and former President Donald Trump engage in a neck-and-neck race in the US elections, the outcome of the US monetary policy is keeping investors on edge. A disputed result could mean that the vote count drags on for days or weeks, increasing volatility. Investors are cautious due to the stark differences in the candidates’ programmes.

 

“Nerves surrounding the US presidential election outcome persist, as it could result in major global policy shifts. The market’s recovery in the final hour was fuelled by short covering ahead of the US election results, following a sharp fall on Monday. We expect markets to remain volatile due to global factors, with stock-specific action as index heavyweights announce quarterly results in the coming days," said Siddhartha Khemka, head of research and wealth management at Motilal Oswal Financial Services.

 

In addition to the US elections and the Fed announcement, the remainder of corporate earnings and the stimulus announcement from China will influence the market trajectory.

 

“Investors may choose a safe strategy of remaining invested and accumulating stocks in segments that can weather volatility. Along with leading financials, automotive stocks have shown earnings momentum and improving prospects moving forward,” added Vijayakumar.

 

FPIs continued to be net sellers, offloading shares worth Rs 2,569 crore, while domestic institutions purchased shares worth Rs 3,031 crore.