News

Published: October 27, 2023
Updated: October 27, 2023

Sensex and Nifty Snap 6-Day Losing Streak: Factors Driving the Market Rally

Relief for Investors

After a challenging six-day losing streak, the domestic equity market rebounded with significant gains. A surge of low-level buying across the board fueled a relief rally, with traders showing interest in beaten-down quality stocks. However, caution prevailed among investors due to pending results from Reliance Industries and upcoming US economic data.

Impressive Gains

BSE's Sensex climbed more than 634 points, or 1.01%, closing at 63,782.80. NSE's Nifty50 also made substantial gains, rising by 190 points, or 1.01%, to reach 19,047.25. Notably, the broader markets outperformed the headline peers, with the BSE midcap and smallcap indices surging by about 2% each. Furthermore, the India VIX, a fear gauge, dropped significantly by over 7% to 10.91 levels.

Market Recovery

Compared to the sharp corrections experienced in the previous session, the domestic market exhibited a strong recovery. This recovery was attributed to restrained foreign institutional investors (FIIs) selling, along with stabilization in currency and global bond yields. Vinod Nair, Head of Research at Geojit Financial Services, noted that Q2 results, although decent, failed to generate enthusiasm in the market. The anticipation of a global economic slowdown due to elevated interest rates and geopolitical risks continues to be a concern.

Factors Driving the Rally:

1. JP Morgan Upgrades India:
Global brokerage firm JP Morgan upgraded India's equities from 'Neutral' to 'Overweight.' The firm suggested that investors consider any near-term corrections as opportunities to leverage the positive historical seasonality related to general elections. JP Morgan highlighted India's strong nominal GDP compounding in the emerging market.

2. Eased Down US Treasury Yields:
The yield on the 10-year US Treasury, which had reached 5% earlier in the week, took a breather and hovered around 4.845%. This stabilization in bond yields served as a benchmark for global borrowing costs and contributed to market stability.

3. Rising Global Markets:
Positive US economic growth data and expectations of decreasing price pressures provided a boost to global markets. MSCI's all-country equity gauge rose by 0.2%. The US economy expanded at a rapid pace in the third quarter of 2023.

4. Signs of Ceasefire:
Hamas signaled a willingness to de-escalate the ongoing conflict with Israel. The release of hostages in Gaza was linked to a ceasefire, and global pressure was mounting on Israel to halt ground operations.

5. Rebound in Indian Rupee:
The Indian rupee halted its three-day slide against the US dollar, strengthening by 2 paise to 83.23. Positive cues from domestic equity markets and a weaker US dollar overseas contributed to this rebound.

6. Strong Q2 Earnings:
Several Indian blue-chip companies, including Cipla, Maruti Suzuki, Bajaj Finserv, Dr. Reddy's Laboratories, and SBI Life Insurance Company, reported strong performances in the second quarter. However, Reliance Industries delayed announcing its results during market hours.

7. Technical Analysis:
After six consecutive sessions of decline, the market was in an oversold zone, and investors anticipated a relief rally. While Nifty showed signs of a possible pullback rally, technical analysts cautioned that further weakness could occur below certain levels.

The market's six-day losing streak was broken as buying support pushed Nifty past the 19,000 mark. Despite this rebound, some uncertainties remain, including the ongoing Israel- Hamas conflict. Investors should continue to monitor these factors for market stability.