Why did market rise today? Sensex jumps over 685 points, Nifty closes above 22,750. 4 key factors behind D-St rally

The Indian stock market extended sharp gains on Tuesday, with Sensex and Nifty rising up to nearly 1% each as cooling oil prices, strong Q2 updates and other factors boosted investor confidence for the second consecutive session following an incessant selloff.

Sensex rose over 685 points to close at 73,068, while Nifty 50 gained over 220 points to end the session at 22,776. The gains added nearly Rs 5 lakh crore to the total market capitalisation of all companies listed on BSE, pushing it near Rs 474 lakh crore.

Trent shares rallied nearly 13% to lead gains on Sensex after a strong Q2 business update. Kotak Mahindra Bank shares jumped around 4%, while those of HUL, Reliance Industries (RIL), IndiGo and Eternal gained 2-3%. Bucking the trend, Tech Mahindra shares fell over 2%, while those of ITC, Titan, Infosys, Bajaj Finance and few others were down around 1% each.

Amid the renewed market optimism, volatility measure India VIX plunged more than 8% to fall below 14. Broader markets also recorded gains, with Nifty Midcap 100 and Nifty Smallcap 100 indices rising more than 1%.

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Here are the key factors pushing markets up today.

1) Oil dips below $100

While tensions simmer in the Middle East, easing supply concerns cooled down oil prices further. Brent crude futures dipped below the crucial $100 per barrel mark while WTI Crude futures were trading near $88 per barrel.

Gulf oil flows excluding Iran jumped to reach more than 81% of pre-war levels in September, Reuters cited data as showing, led by a recovery in Saudi exports despite attacks on the kingdom's oil infrastructure and escalating Iranian attacks on regional shipping, while Iranian exports fell to zero due to a US blockade.

While the market remains nervous about potential supply disruptions from the region, Gulf oil producers continue to adapt to the region's situation, the report quoted ING analysts as saying. "Kuwait said that it is producing at 75% of pre-war levels, while the Saudis also cut the official selling price of their Arab Light into Asia for November loadings, a sign of an improving supply picture," they added.

2) Strong Q2 updates

Strong Q2 updates from heavyweight companies further boosted investor sentiment on the market. Trent shares rallied 13% after the Zudio parent reported a 23% year-on-year increase in standalone revenue from operations to Rs 5,788 crore for the April-September quarter of FY27, beating estimates.

Kotak Mahindra Bank shares meanwhile rallied over 4% after the private lender released its provisional business update for the July-September quarter of FY27, reporting nearly 25% year-on-year rise in net advances to Rs 5.77 lakh crore.

3) Bond yields cool down

Bond yields meanwhile cooled down further after soaring to multi-decade highs last week. The yield on the 30-year US bonds stood at around 5.6%. The yield on the 10-year notes meanwhile decreased to 5.28%.

The previous selloff seen on Dalal Street was intensified by the soaring bond yields, which typically make debt markets more attractive to investors, which in turn puts pressure on the emerging equity markets. Bond yields move inversely to bond prices, so soaring yields reflect a sharp selloff in bonds.

4) Strong global cues

Dalal Street is accompanying its global peers today. Japan’s Nikkei jumped more than 1%, while Hong Kong’s Hang Seng and Shanghai Composite also recorded gains. In Europe, France’s CAC, Germany’s DAX and UK’s FTSE gained up to 0.8%.

Wall Street indices yesterday recorded sharp gains, with the tech-heavy Nasdaq surging over 1%. Dow Jones futures are currently in the green, implying a positive start for the American stock market later today.

Why caution is warranted?

It would be challenging for the bulls to sustain the rally beyond a point, warned VK Vijayakumar, Chief Investment Strategist at Geojit Investments. Since the US 10-year bond yield hovers around 5.3%, FIIs will continue selling, pushing the market construct into a ‘sell on rally’’ mode, he said.

This means FIIs will continue to sell large-caps despite their attractive valuations and DIIs will continue to buy these stocks since the fund inflows continue unabated. A sustained rally in the market will require a sharp dip in crude prices, according to the analyst. But there is no clarity on this front.

“This uncertainty will weigh on the central bank when the RBI Governor announces the MPC policy decision tomorrow. A 25 bps rate hike appears inevitable in the context of rising inflationary expectations and the rising bond yields in most of the developed world. A rate hike is already discounted by the market and, therefore, the focus of the market participants would be on the policy stance and the RBI’s estimates on growth and inflation,” he said.

From the investors’ perspective it is important to understand that a rate hike would be beneficial for the banks whose margins will improve from rising floating rates, Vijayakumar said, adding that the strong deposit and credit growth in the economy indicate good prospects for the financial sector.

Technical view on Nifty

Anand James, Chief Market Strategist at Geojit Investments has pencilled in 23,100-23,220 as the near-term objectives to aim for Nifty 50, with 22,800 expected to pose an intermediate challenge.

Meanwhile, the benchmark index’s inability to push above the 22,555-22,615 band today will signal the need for some more consolidation, but favoured view does not see a stretch beyond 22,050 for now, the analyst said.

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Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.