Indian stock markets witnessed a strong rally on Wednesday, with the Sensex jumping more than 1,300 points and the Nifty 50 crossing the 25,400 mark. At 9.45 a.m., the Sensex rallied over 1,300 points to 82,486 while the Nifty 50 jumped more than 350 points to trade above the 25,400 level, extending sharp gains recorded this month so far.
Why it matters
Four factors drove the rally: continued foreign institutional buying, lower crude oil prices, a stronger rupee and encouraging corporate earnings. Foreign investors have turned net buyers in November, investing 53,739 crore rupees in the first nine days of the month, and the sharp gains added nearly 6 lakh crore rupees to the total market capitalisation of listed stocks. IndiGo, Mahindra and Mahindra and HDFC Bank led the gains, and the small cap index rose 1.67 percent as the rally broadened beyond the big names.
The rally pushed both benchmark indices to their highest levels since February 27, and the Nifty has surged around 9 percent in just six trading days of this month. IndiGo, Mahindra and Mahindra and HDFC Bank led the gains, helped by softer crude and foreign inflows, and the broader markets joined in, with the small cap index up 1.67 percent.
What happens next
The crude link matters. Brent touched a two month low of about 89.16 dollars a barrel on Tuesday as United States officials played down the possibility of additional military action against Iran, and cheaper oil is a direct boost for India, which imports most of its crude. The same de-escalation hopes that hurt oil helped the Sensex.
What happens next will be decided by whether the foreign buying continues and whether crude stays low. The rally gave up some gains by the afternoon, with the Sensex trading about 700 points higher at 2 p.m., but the morning surge was the story: after a Diwali break, Dalal Street came back buying, and the momentum is now the market to beat. The Nifty has surged around 9 percent in just six trading days of this month, and foreign investors put 53,739 crore rupees into Indian equities in the first nine days of November. The rally gave up some gains by the afternoon, but the morning surge still left both indices at their highest since February 27.
