Sensex, Nifty jump nearly 1%; key factors behind Thursday's stellar rally

Stock market today: Indian equities ended the last trading session of the FY 2024 on a strong note led by aggressive buying in banking and financial stocks. At the close, Nifty ended 0.92 per cent higher at 22,326.9, while Sensex added 0.9 per cent or 655 points and settled at 73,651.35. Meanwhile, broader markets also showed resilience, though underperforming their headline peers.  Markets are closed tomorrow on the eve of Good Friday.

Here are the likely factors driving gains:

Banks and financials lead gains

After the RBI eased the provisioning norms for banks and NBFCs investing in AIFs, or alternate investment funds, banks and financials gained sharply. As per the new ruling, provisioning will be required only to the extent of investment by the RE in the AIF scheme, which is further invested by the AIF in the debtor company, and not on the entire investment of the RE in the AIF scheme.

“This relaxation will certainly help the AIF and the financial services industry, as maximum investment would be like equity investments by AIFs. The situation with hybrid instruments is not exempt. This would include investment in CCPS by the AIFs; this may not be intended as CCPS are quasi-equity instruments and not debt instruments. There is also an adequate case for exempting CCPS investments,” Punit Shah, Partner, Dhruva Advisors, said.

Nifty PSU Bank emerged as the top gainer, with gains of over 3 per cent. Within the pack, Indian Overseas Bank and Punjab and Sind Bank were the top gainers, rallying up to 8 per cent.

T+0 settlement

The beta version of the same-day trade settlement has been launched today for some 25 listed securities with some select brokers. The move is said to be a win-win for both traders and investors, as the transition will offer immediate liquidity. 

“This shift will substantially reduce the risk exposure for retail investors, and the system guarantees same-day access to funds and securities, thereby mitigating counterparty and duration risks. The Securities and Exchange Board of India's (Sebi) aim is to boost investor confidence and simplify the trading process for retail investors. However, there may be some technical limitations and glitches in the early days for all the counterparties due to the high volume of trades. Overall, it is a win-win game for all sets of investors,” said Prashanth Tapse, Senior VP (Research), at Mehta Equities. 

Strong FII and FII inflows

In the previous trading session, foreign portfolio investors on a net basis bought Indian equity worth Rs 2,170 crore, while DIIs, or domestic institutional investors, poured in a net of Rs 1,198 crore in Indian shares. Over the last seven trading sessions, DIIs have pumped in a staggering Rs 24,373 crore into the market, imparting resilience to the market, said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Global markets

European markets traded on a positive note, with Germany’s DAX up by around 0.5 per cent. However, Asian stocks were mixed. Hong Kong’s Hang Seng was up over 1 per cent ahead of the key US core personal consumption expenditures (PCE) price index data due to be released on Friday.