Bulls charge back as market gains over 2% — Key factors that drove rally on Dalal Street today

Factors behind Nifty50, Sensex Rally:  Ahead of the stock market holiday on Wednesday, the Indian market ended on a strong note as benchmarks Nifty50 and Sensex closed higher by more than two per cent each on Tuesday. The broader Nifty50 jumped around 350 points to close above 17,250, while the Sensex surged by more than 1250 points to end near 58,100-mark. 

As the indices rebounded on Tuesday with bulls taking control of Dalal Street, here are the factors that led to today's rally.  

Positive Global Markets 

All major Wall Street indices gained 2-2.5% in the US market on Monday as Dow Jones surged by 765 points in the biggest intraday jump since Junne 2022. Nasdaq Composite and S&P 500 added 239.82 points (2.27%) and 92.81 (2.59%) respectively. In the Asian market, Japanese Nikkei 225 jumped over three per cent in intraday trade, while SGX Nifty gained more than 400 points to trade near 17,300 on Tuesday. Hang Seng Index at the Hong Kong Exchange remained closed due to holiday.    

Strong Show by IT, Bank and Financial stocks 

Amid robust Quarter 2 business updates, IT, Bank and Financial stocks led from the front. The Nifty IT index ended higher by 2.87% as tech majors TCS, Infosys, Wipro and HCL Tech gear up for Q2FY23 results next week. Banking and financial indices surged up to 3.16% as advances and collections improved in the second quarter, according to business updates by most of the banks.  

"Indices surged over 2% buoyed by positive global cues and encouraging quarterly updates on advances and collections from Banks during the second quarter," said S Ranganathan, Head of Research at LKP securities. 

Ahead of the festive season, the street is optimistic on retail demand across segments and we saw Financials lead from the front today, he said.  

"Participation of the IT sector today lent ammunition to the Bulls as almost all sectoral indices ended in the Green as we near the end of the Navratri festival. Positive Tailwinds at Home amidst gloom elsewhere in the globe left Bears stranded today as the Sensex vaulted past 58K," he added.  

UK Policy UK's Policy U-turn  

In a booster dose to weak global cues, the new Liz Truss-led UK government on Monday made an embarrassing U-turn on its central plank of tax cuts by withdrawing a controversial policy to abolish the topmost income tax slab for the wealthiest, following market turmoil and to avert a feared rebellion within the governing Conservative Party. 

FIIs turning net buyers in cash market  

The Foreign Institutional Investors (FIIs) turned net buyers on the first trading day of October as they bought equities worth Rs 590.58 crore. The FIIs sold to the tune of Rs 18,308.30 crore in the cash market in September against a net buy of Rs 14,119.75 crore by Domestic Institutional Investors (DIIs). 

"For the near-term the market sentiments have turned positive with declining trend in dollar and US bond yields. If this trend continues FIIs will again turn big buyers in India and they will not get stocks cheap," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. 

Smart recovery in Nifty50 

The Nifty saw a smart recovery on October 4, post a steep decline in the previous session.  

"On October 03, the index had gone down to retrace nearly 78.6% of the rise seen on September 30. The key Fibonacci level acted as a spring board, resulting in a swift up move today," said Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas. 

Going ahead, 17300 is the immediate barrier to watch out for, he said. Unless that is crossed on a closing basis, the index is likely to witness a short-term consolidation. "However, if the bulls manage to surpass 17300 on a closing basis then the index can stretch till 17500. Near term support shifts higher to 17000," the expert added.