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The Indian equity markets experienced a robust recovery on Tuesday, erasing the previous session's losses. This positive performance was driven by strong gains in the metal and banking sectors, fueled by positive cues from Asian markets and anticipation of stimulus measures from China. The BSE Sensex closed at 79,476.63, up 694.39 points or 0.88 percent, while the NSE Nifty 50 advanced 217.95 points or 0.91 percent to end at 24,213.30.
Metal stocks led the rally, with JSW Steel emerging as the top Nifty gainer, surging 4.57 percent, followed by Tata Steel at 3.74 percent and Hindalco at 3.51 percent. The sector's strong performance was attributed to positive developments in China's steel sector. Deepak Jasani, Head of Retail Research at HDFC Securities, explained that China's national steel PMI increased by 5.6 points to 54.6 in October, returning to expansion territory for the first time since March 2023. This positive data led to increased buying interest in metal stocks.
Banking stocks also contributed significantly to the day's gains. The Bank Nifty climbed 992 points or 1.94 percent to 52,207.25. Axis Bank rose 2.71 percent, and the Nifty Financial Services index advanced 1.98 percent to 24,128.90. This positive trend in the banking sector suggests an optimistic outlook on the Indian economy's growth prospects.
However, not all sectors performed well. Some stocks faced selling pressure. Trent emerged as the top loser, declining 1.71 percent, followed by Adani Ports (-1.50 percent), Asian Paints (-0.87 percent), ITC (-0.75 percent), and Infosys (-0.60 percent). The reasons for these declines are not explicitly mentioned in the article but could be attributed to a combination of factors, such as company-specific news, investor sentiment, or broader market trends.
Market breadth remained positive with 2,468 stocks advancing against 1,478 declining on the BSE. Additionally, 207 stocks hit 52-week highs while 22 touched 52-week lows. This data highlights the overall positive sentiment in the market, with a significant majority of stocks experiencing gains. The presence of stocks hitting 52-week highs suggests investor confidence in the long-term growth prospects of these companies.
While the market recovery was driven by positive factors like the strong performance in metal and banking sectors, the article also acknowledges potential headwinds. These include uncertainty surrounding the U.S. presidential election, the likely downgrade in Q2 GDP forecast, and the overall global economic climate. However, the article highlights that recent data on domestic manufacturing activity and the expected revival of consumption in the second half of the year are likely to support market sentiment.
Oil prices also influenced market sentiment. OPEC+ postponed its December output increase by a month, leading to a rise in Brent crude by 3.1 percent to $75.34 and WTI by 3.2 percent to $71.73. This increase in oil prices could have a mixed impact on the Indian economy, as higher oil prices can increase inflation but also benefit oil and gas companies.
The India VIX, which measures market volatility, dropped by 3.39 percent to close at 16.1225, indicating reduced market uncertainty. This decrease in the volatility index suggests that investors are becoming more confident about the market's direction, further contributing to the positive sentiment.
FIIs/FPIs saw a net outflow of ₹4,329.79 crore, while DIIs had a net inflow of ₹2,936.08 crore, partially balancing the FII impact. This data suggests that foreign institutional investors are showing some caution while domestic institutional investors are more optimistic about the market. The article concludes by highlighting the importance of watching key technical levels. Mandar Bhojane, Research Analyst at Choice Broking, suggests that if prices sustain above the 24,400 mark, it could confirm a bullish reversal, potentially propelling the index toward the 24,800 and 25,200 levels in the upcoming week.
The article also mentions that Chinese officials are expected to announce approximately $140 billion in extra budget spending, primarily for indebted local governments and banks. This potential stimulus measure could further influence market sentiment in the coming days, particularly for sectors that are likely to benefit from increased government spending.
Source: Closing bell: Strong performance in metals and banking drives Indian stock market recovery