After a losing streak of three sessions, benchmark equity indices stormed back on Wednesday on the back of strong buying by both domestic and foreign investors.
The Global Catalyst
Softening crude oil prices—driven by ongoing peace talks between Russia and Ukraine — along with rising expectations of rate cuts by both the US Federal Reserve and the RBI in the December policy review were the key catalysts behind Wednesday’s surge. On Tuesday, Brent crude fell 2.79% to $61.6 per barrel.
The Sensex soared 1,022.50 points (1.21%), logging its biggest single-day gain in four months, to close at 85,609.51. It is now just 226.61 points away from its all-time closing high of 85,836.12 recorded on September 26 last year.
The Nifty jumped 320.50 points (1.24%) to end at 26,205.30, just 10.75 points short of its record closing high of 26,216.05. In the previous three sessions, the Sensex and Nifty had together lost 1,045 points (1.22%) and 307 points (1.17%), respectively.
Record Flows and Fundamentals
Foreign portfolio investors (FII) bought $535 million (₹4,778 crore) worth of equities, while domestic institutional investors (DII) purchased ₹6,248 crore, as per provisional BSE data. With Wednesday’s flows, DII equity investments surpassed ₹7 lakh crore for the first time ever.
Nilesh Shah, MD, Kotak Mahindra AMC, said the market is sensing a reduction in the intensity of FPI selling, a higher likelihood of double-digit earnings growth from the December quarter, and a slew of government reforms aimed at pushing growth into a higher orbit. “This optimism is overpowering relentless promoter selling. Markets are at an all-time high due to this optimism. Investors must maintain their asset allocation in such a market,” Shah added.
“Overall corporate earnings have come in better than expected, and the pace of earnings downgrades has softened meaningfully. Another key factor is the relative underperformance of Indian markets—while global indices rallied over the last 14 months, domestic equities largely moved sideways. A catch-up phase was due, and we are seeing that unfold now,” said Sandeep Raina, head of research, Nuvama Professional Clients Group.
He added that another factor is the market sentiment. When the majority of participants turn cautious or maintain a subdued outlook, markets often move in the opposite direction. “Currently, we seem to be in such a phase—where scepticism is high and positioning is light—typically when markets surprise on the upside,” he added.
Domestic equity indices were the fourth-best performers in Asia on Wednesday, ranking behind South Korea (up 2.67%), and Japan and Taiwan (both up 1.85%). China and Thailand were the only laggards, posting modest losses.
Market breadth was strongly positive, with 2,800 gainers against 1,371 losers on the BSE. Broader indices also participated in the rally, with the BSE Midcap and BSE Smallcap rising 1.32% and 1.23%, respectively.
Except for two Sensex constituents—Asian Paints and Bharti Airtel—and six Nifty stocks, all ended in the green.
Investors’ wealth jumped ₹5.50 lakh crore, marking the biggest single-day increase in three months, taking the BSE market capitalisation to ₹474.92 lakh crore.
Barring telecom (down 0.04%), all sectoral indices on the BSE and NSE ended with gains. Metal, oil & gas, consumer durables, energy, and capital goods were the top performers, rising up to 2.08%. Both the BSE Bankex and Bank Nifty hit their respective all-time highs.
Index heavyweights HDFC Bank, Reliance Industries, ICICI Bank, Infosys, and L&T together contributed 609 points, accounting for nearly 60% of the Sensex’s 1,000-point rally.
Bajaj Finserv, Bajaj Finance, Tata Steel, Reliance Industries, and Sun Pharma were the top Sensex gainers, rising up to 2.63%.