Stock market update: Sensex jumps over 600 points; Nifty above 7-month high

Stock markets rallied on Tuesday for the fourth straight session with the Nifty reclaiming its crucial psychological 11,600 mark to end at its highest level in seven months. The rally which was driven by stocks of financials has come amid strong global cues and improving economic indicators. The Nifty rallied by 159.05 points, or 1.38%, to close at 11,662.4 whereas the Nifty Bank was up by 2.16% and closed at 22,853.7. The Sensex rallied 600.87 points, or 1.54%, to close at 39,574.57.

Foreign portfolio investors have been buyers in the last two sessions of October, buying equities worth $300 million in total. On Monday, they bought stocks worth $31.89 million. The IHS Markit’s Services Business Activity Index rose for the fifth straight month in September to 49.8 from 41.8 in August.

Stocks of banks and financials which have been consistent underperformers were trading in the green. Sanjeev Hota, Head of research, Sharekhan by BNP Paribas, said, “Financial stocks have been laggards since the last few months but there may not be any further huge underperformance from here on. On Tuesday, a lot of factors contributed to the rally in banking stocks such as the pre quarter update from HDFC Bank and HDFC, which was quite good. The overhang of the interest waiver has gone and the loan moratorium has ended so banking stocks have started participating in the rally.”

Additionally, the Monetary Policy Committee saw three new members take charge, who according to market participants, are more neutral to dovish.

Nomura, in a report, said, “Overall, the new external MPC members appear to be more neutral-to-dovish in their policy views. They are likely to be vocal on liquidity, credit market dynamics, and may not shy away from advocating for the RBI to look at unconventional or untested measures. They are likely to look through the current phase of elevated inflation and find space to lower rates further.”

This also caused the banking stocks to rally with the top gainers in Nifty Bank being Bandhan Bank, IndusInd Bank, IDFC First Bank, RBL Bank, and HDFC Bank up by 4.8 % to 2.58%.

Additionally, the risk appetite of investors improved after the US President Donald Trump returned to the White House in Washington putting an end to the cloud of uncertainty over the leadership of the country. Meanwhile, US fiscal stimulus talks were indicated to be on an advanced stage which also cheered the global markets. IFA Global, said, “Anticipation of president Trump recovering from Covid-19 and of Democrats and Republicans reaching a consensus on a fiscal stimulus package seems to be buoying risk sentiment.”

The Dow Jones mini futures were up by 77 points at the time of press. Asian stock markets mirrored Wall Street’s gains overnight with bourses in South Korea, Hong Kong and Taiwan rising between 0.3% to 1.24%. The European markets in the United Kingdom, Germany and France were also up by 0.1% to 0.5%.

The turnover on the futures and options segment was at Rs 16.55 lakh crore whereas, in the cash market it was at Rs 49,807 crore, according to NSE data. This is against the six month average of Rs 16.78 lakh crore and Rs 56,614 crore.