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Anticipation of a deal between Saudi Arabia and Russia to cut oil output, Japan’s preparation for a $1-trillion stimulus, expectations of another US stimulus, and the fall in Covid-19 cases in Europe boosted the mood in global stock markets, including India.
After the US stock markets rallied by more than 7 per cent on Monday, the Sensex and Nifty gained nearly 9 per cent in a single trading day on Tuesday.
The rupee also surged by 49 paise to close at 75.64.
It was the largest single-day gain for the two benchmark indices in nearly a decade. In the coming months the market focus will be more on how economic activity revives in India and especially the news coming from the banking sector, analysts said.
The Sensex rose 2,476 points to close at 30,067. The Nifty index gained 708 points at 8,792. The Bank Nifty gained 10.42 per cent. Foreign portfolio investors bought stocks worth ₹741 crore in the cash segment and domestic institutional investors were net buyers to the tune of ₹422 crore.
Cutting oil production will boost global oil prices, which can be beneficial for sovereign funds of oil-rich nations as they would not have to divert their funds from markets. Also, it limits losses for oil companies. When oil prices crash there is a fall in asset prices across like equities, gold and bonds in anticipation that the sovereign wealth funds of oil-rich nations will liquidate assets.
“The Nifty index is coming out of the most oversold readings since 2008 or even 2001 based on positions breadth or technical indicators. In that sense, a big rally of such a magnitude was overdue in a bear market. We are heading back to near 10,000 levels for the Nifty, which marks a 50 per cent re-tracement on the technical charts of the entire fall in March,” said Rohit Srivastava, chief strategist, IndiaCharts. Market experts said money was moving from liquid schemes of domestic MFs in equity schemes since stocks were not available at valuations seen more than a decade ago.
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