Stock markets staged a strong comeback on Wednesday, with the benchmark Sensex surging more than 650 points and the Nifty reclaiming the 23,950 mark, as investors returned to banking and IT stocks after the sharp selloff witnessed in the previous session.
The S&P BSE Sensex jumped 665.79 points, or 0.87%, to 76,866.47, while the NSE Nifty50 rose 144.15 points, or 0.61%, to 23,968.25 at around 11:20 am.
The rally comes a day after the Sensex plunged nearly 900 points amid concerns over slowing economic activity, weak monsoon progress and a selloff in global technology shares.
LOWER CRUDE PRICES BOOST SENTIMENT
One of the biggest factors supporting the market was the continued decline in crude oil prices.
Brent crude slipped below $77 per barrel, extending its recent decline as progress in US-Iran peace negotiations eased fears of supply disruptions through the Strait of Hormuz.
For India, which imports the majority of its crude oil requirements, lower oil prices are a major positive. They help reduce inflationary pressures, improve the country’s current account position and support corporate profitability.
Market participants have increasingly viewed falling crude prices as a strong tailwind for the Indian economy and equity markets.
RBI GOVERNOR’S COMMENTS CHEER INVESTORS
Investor sentiment also received a boost after Reserve Bank of India Governor Sanjay Malhotra indicated that it was premature to discuss any rate hikes in India.
Malhotra told ET Now that the central bank does not yet see signs of inflation becoming broad-based, suggesting borrowing costs could remain supportive for growth.
The comments reassured investors who had become concerned after the US Federal Reserve signalled a more hawkish stance and raised the possibility of higher rates later this year.
BANKING STOCKS LEAD THE CHARGE
Financial stocks emerged as the biggest contributors to the rally.
The Nifty Financial Services index rose more than 1%, while the Nifty Private Bank index gained nearly 1.5%.
ICICI Bank climbed 2.65%, HDFC Bank rose 1.94%, Axis Bank gained 1.17%, Kotak Mahindra Bank advanced 1.05% and SBI added 0.63%.
Banking stocks also benefited after the RBI allowed banks to extend loans to non-residents against foreign currency deposits, a move that improves funding flexibility and supports liquidity.
Given their heavy weightage in benchmark indices, gains in financial stocks provided significant support to the Sensex and Nifty.
IT STOCKS RECOVER AFTER RECENT SELLOFF
Technology stocks, which had been under pressure in recent sessions, also witnessed strong buying.
The Nifty IT index rose 1.39%, making it one of the best-performing sectoral indices of the day.
Tech Mahindra surged 2.71%, Infosys gained 1.94%, TCS rose 1.55% and HCLTech advanced 0.37%.
The rebound came after investors used recent corrections as a buying opportunity, even as concerns around global technology demand and US interest rates continue to linger.
GLOBAL CUES IMPROVE
Asian markets remained under pressure after Tuesday’s sharp selloff in semiconductor-heavy markets such as South Korea and Taiwan.
However, investors took comfort from signs that those markets were beginning to stabilise.
Rajesh Palviya, Head of Research at Axis Direct, said easing geopolitical tensions and lower crude prices had improved global risk sentiment.
He noted that Brent crude hovering around $76 per barrel is particularly encouraging for India and has helped improve market confidence.
TOP GAINERS ON SENSEX
Tech Mahindra emerged as the top gainer, rising 2.71%, followed by ICICI Bank (+2.65%), IndiGo (+2.12%), Trent (+1.98%), Infosys (+1.94%), HDFC Bank (+1.94%), Bajaj Finance (+1.76%) and TCS (+1.55%).
These stocks accounted for a large part of the benchmark’s gains.
Despite the rally, investors remain cautious about a few emerging risks.
The southwest monsoon remains significantly below normal, with rainfall running around 43% below average so far this season. A prolonged deficiency could hurt rural demand, impact agricultural output and push up inflation.
In addition, markets continue to monitor signals from the US Federal Reserve, where expectations of future rate hikes remain elevated.
For now, lower crude oil prices, a stable rupee, moderating foreign investor outflows and supportive signals from the RBI have helped restore confidence after Tuesday’s sharp correction.
However, the sustainability of the rally will depend on the progress of the monsoon, global interest rate trends and developments in US-Iran negotiations.
