In the backdrop of talks by the US seeking a deal with China to avert a ‘trade war’ bringing calm to stock markets globally, India’s banking crises were put on the back-burner in domestic stock market as traders covered their short positions on Monday, resulting in a rebound in the Sensex and Nifty from the lows of this year.

Market experts believe the rally could continue in the coming days unless the US went back to its aggressive stand of moving ahead with imposing tariffs on China. The S&P BSE Sensex rose 469 points or 1.44 per cent to close at 33,066. The CNX Nifty index rose 132 points or 1.33 per cent at 10,130.

A 300-point rebound in Dow Jones futures, the key US index, early on Monday gave hope to the markets that things could stabilise between the US and China. Bond markets too took a cue and were seen stable globally.

Trade deficit with China

Subsequently, India’s government too on Monday announced after market hours that China’s visiting Commerce Minister Zhong Shan had promised to address the trade deficit between the two countries. India’s trade deficit with China has widened to $51.1 billion, a nine-fold increase over the last decade.

India too like the US has been making repeated calls for China to address the imbalance and open its markets.

The Centre in the recent past has been imposing higher duties on Chinese goods. A major fall in global stock markets came after US President Donald Trump last week signed a memorandum that could impose tariffs on up to $60 billion of imports from China.

Banking stocks were the major gainers. The Nifty Bank index rallied 600 points and HDFC Bank, HDFC, SBI, ICICI Bank, L&T, YES Bank rallied up to 6 per cent.

“A rally in banking stocks and benchmark indices by 4-5 per cent could be an ideal scenario for the bears, unless earnings growth picks up sharply in India,” said the head of a research house based in Mumbai. “If the Nifty index moves beyond 10,300 the rally could stretch up to 10,550 or 10,600 levels.”