Benchmark indices extended gains, closing in the green for the second consecutive session amid a broad-based rally on Tuesday.

Market opened on a positive note amid gains in the Asian markets. Indices extended gains through the day and closed higher amid broad-based buying, with the rally led by metals and gains in heavyweights such as Reliance. 

The BSE Sensex closed at 54,318.47, up 1,344.63 points or 2.54 per cent. It recorded an intraday high of 54,399.42 and a low of 53,176.02. The Nifty 50 closed at 16,259.30, up 417.00 points or 2.63 per cent. It recorded an intraday high of 16,284.25 and a low of 15,900.80.

Breadth remains positive

The market breadth remained positive with 2,624 stocks advancing on the BSE, as against 714 that declined, while 124 remained unchanged. Furthermore, 12 stocks hit the upper circuit as compared to four locked in the lower circuit. Besides, 49 stocks touched a 52-week high and 52 touched a 52-week low.

The volatility index softened 7.27 per cent to 22.74.

S Ranganathan, Head of Research at LKP securities, said, “A ferocious up-move from the metal index lifted Reliance together with other sectoral indices in the afternoon trade  today, leaving bears gasping and covering short positions and looking for the reasons for the rally.”

According to Ranganathan, the rally in benchmark indices, despite the WPI April numbers, coupled with the breadth of the rally surprised many on the street, coming as it did after a relentless fall.

Vinod Nair, Head of Research at Geojit Financial Services, said, “After a long gap, the market has witnessed a strong resilience supported by heavyweights and broader markets. The market was trading in oversold territory and was inspired by optimism in the Asian markets led by Chinese technology stocks, in hopes of easing regulatory crackdown and declining Covid cases.”

Further, one of the major events of the day was the listing of the mega LIC IPO, which listed at a discount. 

According to Milind Muchhala, Executive Director, Julius Baer India, “The Indian equity markets, in line with the global equity markets, seem to be in the midst of a perfect storm, displaying an extremely high level of volatility.”

According to Muchhala, concerns including inflationary pressure and tightening by global central banks, long-drawn geopolitical crisis and the fresh wave of Covid-19 in China have reflected in rising inflation (including in India), margin pressure in the Q4FY22 results across sectors due to higher input and freight costs, and the cautious commentaries by various corporates for the near term.

The Producers’ inflation rate based on Wholesale Price Index (WPI) in India reached an all-time high of 15 per cent in April. It was 14.55 per cent in March.

“There are increasing concerns on the possibility of a stagflationary scenario, which, coupled with rising bond yields, does not augur well for equities as an asset class. The rising dollar index (DXY) and the persistent selling by FIIs are also not helping the cause,” Muchhala said. 

Uncertainty and volatility are expected  to persist in the near term. 

“The markets will continue to remain influenced by news related to central bank actions, especially the US Fed, and inflationary trends. In the short term, there could be some technical pull-backs in the markets, considering the pessimism and oversold conditions. Even from the FIIs’ perspective, they seem to be holding one of the lowest net long positions in recent times in the F&O segment, which can trigger some short covering in case the markets move up. However, we seem to be in a slightly long-drawn phase of consolidation with bouts of significant intermittent volatility,” Muchhala said.

All in green

All stocks closed in the green on the Nifty 50, where Hindalco, Tata Steel, Coal India, JSW Steel and ONGC were the top gainers.

All sectoral indices also closed in the green with metals recording highest gains.

Nifty Metal closed nearly 7 per cent higher. Nifty Oil & Gas was up nearly 4 per cent while Nifty IT was up nearly 3 per cent. Nifty Bank, Nifty Financial Services, Nifty Private Bank, Nifty PSU Bank, Nifty Auto, Nifty FMCG and Nifty Consumer Durables each closed over 2 per cent higher. 

Broader indices

Broader indices were also trading in the green.

The Nifty Midcap 50 was up 2.59 per cent while the Nifty Smallcap 50 was up 3.40 per cent. The S&P BSE Midcap was up 2.51 per cent while the S&P BSE Smallcap was up 2.78 per cent. 

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