Home / Markets / Stock Markets /  Stocks surge 2%, post best one-day gain in five weeks

NEW DELHI : Indian stocks soared, led by a sharp rebound in global indices, as investors speculated that central banks might moderate their aggressive interest rate hikes to prevent a global recession following weak US economic data.

Benchmark indices Sensex and the Nifty ended trading on Tuesday with gains of 2.25% and 2.29%, respectively, closing at 58,065.47 and 17,274.30 levels.

It was the market’s best day in five weeks, recording the sharpest gain since the 2.7% advance on 30 August.

While aggressive monetary tightening by most of the world’s major central banks led to pressure on stocks amid fears of recession and heightened risk-off sentiment, investors now expect the US Federal Reserve may be forced to back away from aggressively tight monetary policy.

Analysts said an unexpected slowdown in the US manufacturing PMI triggered speculation that the US Federal Reserve would slow the pace of policy tightening. The manufacturing PMI dropped to 50.9 in September from 52.8 in August, the lowest reading since May 2020. The Dow Jones Industrial Average had its biggest one-day advance in more than three months on Monday, while other indices followed suit.

Asian and European stocks rallied on Tuesday after Wall Street soared overnight, fuelled by hopes that weak US economic data would lead to a change in global central bank policy actions, said Deepak Jasani, head of retail research at HDFC Securities. The Reserve Bank of Australia raised its benchmark interest rate by 25 basis points compared to an expectation of 50 basis rate hikes. In addition, Britain’s decision to ditch part of a controversial tax-cut plan and slightly paler expectations for aggressive central bank action returned some confidence to investors, Jasani added.

With easing concerns on monetary policy tightening, US bond yields also saw some respite, and so did the rising dollar index. The rupee regained strength on Tuesday, closing at 81.52 to the dollar after a sharp fall on Monday to 81.87, just shy of an all-time closing low.

The strengthening of the rupee by 35 paisa to a dollar was due to the fall in the dollar index and pullback in the US yields, said Anindya Banerjee, vice-president of currency and interest rate derivatives at Kotak Securities Ltd. “The rally in stocks also helped. Over the near term, US economic data like ISM services and the US NFP report will provide direction. We expect a range of 81.20 and 82.00 on the spot market," Banerjee said.

Foreign portfolio investors were net buyers of 1,344.63 crore worth of equities on Tuesday. FPIs, who remained net sellers of equity since 14 September, have turned net buyers since Monday. For the near term, FPIs have turned positive with the declining trend in dollar and US bond yields, analysts said.

Upbeat domestic business data released by banks also helped the domestic market.

S. Ranganathan, head of research at LKP Securities, said the indices surged on positive global cues and the encouraging quarterly updates on advances and collections from banks during the second quarter.

Meanwhile, investors are awaiting September quarter earnings reports for further cues, starting next week.

The street is optimistic about retail demand across segments during the festive season, and financials led from the front today, Ranganathan said.

All sectors ended the day with gains, and even laggards such as the IT sector participated in the rally.

Indian markets are showing strength after making near-term bottom around last week’s Nifty low of 16,800 levels, said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services Ltd. The US markets seem to be consolidating after falling to their 52-week lows, Khemka said, adding that pre-quarterly updates from banks and financial companies indicate solid quarterly earnings.

ABOUT THE AUTHOR

Ujjval Jauhari

Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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