Why Sensex rebounded nearly 900 points today

Indian stock markets bounced back in line with global equities as concerns about the Omicron coronavirus variant eased. The Sensex settled 886 points higher at 57,633 while Nifty jumped 1.56% to settle at 17,176. The market breadth also remained strong with BSE midcap and smallcap indices also rising over 1% each. 

"Domestic bourses staged a recovery supported by broad-based buying. Global markets traded with optimism on reports that the Omicron strain may not be as severe as expected. Moreover, additional liquidity freed up by the Chinese Central Bank through policy easing boosted the Chinese markets. In the Indian markets, banking and financial stocks advanced since the MPC is scheduled to announce its policy decision tomorrow where the RBI is likely to keep its policies unchanged considering the short-term uncertainties," said Vinod Nair, Head of Research at Geojit Financial Services.

Asia stock markets followed Wall Street higher today as anxiety about the coronavirus's latest variant eased. Wall Street's benchmark S&P 500 index gained 1.2% after the chief White House medical adviser said the omicron variant might be less dangerous.

Dr. Anthony Fauci, the top U.S. infectious disease official, told CNN on Monday that it does not look like Omicron has a "great degree of severity."

In Indian markets, metal and banking stocks led the gains today with both the sectoral indices jumping over 3% and 2.5% respectively. Among the Sensex stocks, Kotak Bank, ICICI Bank, Axis Bank, Bajaj Finance, SBI and Tata Steel were up between 2% and 3.5%. 

Shares of Tata Motors Ltd gained 3% after the carmaker said on Monday it would hike prices of its commercial vehicles from January.

Santosh Meena, Head of Research, Swastika Investmart, said: “We are in a bull market where we are seeing the first meaningful correction that has completed its 10% from highs of 18604 at the low of 16789. The recent low could be bottom or the correction can see further extension towards the 16700-16400 zone or even lower but this correction is a buying opportunity. It is difficult to say that Nifty will close above 18000 by the end of 2021 but I believe the second half of December is likely to remain positive for the market. Historically, December remains one of the best months where Nifty has witnessed an average 3% gain for the last 10 years.”

The monetary policy committee of the Reserve Bank of India will tomorrow announce its policy decision. The Reserve Bank of India will likely keep its key lending rate at a record low for a ninth straight meeting, with a new virus variant seen as the latest threat to the central bank’s efforts to return policy to normal.

“Although a close call, the RBI will likely avoid a cliff edge in the upcoming policy with any material reverse repo rate hike. The policy will likely again be used as a lever to prepare the markets for a gradualist approach toward normalization. The redistribution/re-pricing of existing liquidity via VRRR tenor/quantum/cut-offs has smoothly helped the alignment of some money market rates toward the repo rate. We believe the markets will still be assuaged about any premature tightening of financial conditions,” Emkay said in a note.