Sensex jumps 612 points, Nifty settles above 21,700; bank stocks gain

Bulls were back on Dalal Street on Wednesday as domestic equity markets settled sharply higher. A slew of global and domestic factors supported the market sentiments and buying in select index heavyweights pushed the markets higher. A broad-based rally across all major sectors supported the sentiments.

BSE Sensex surged 612.21 points, or 0.86 per cent, to settle at 71,752.11, while NSE's Nifty50 index advanced 203.60 points, or 0.95 per cent, to end the session at 21,725.70. Broader markets outperformed the headline indices as BSE midcap index rose 1.5 per cent, while the smallcap index gained over 1.8 per cent. Fear gauge India VIX nudged lower to 16.05-mark.

Short covering in rate-sensitive stocks ahead of key US Fed policy rate decision and domestic Budget announcement tomorrow triggered a major rally in benchmark indices in a volatile led session, said Prashanth Tapse, Senior VP (Research), Mehta Equities.

"At a time when valuations are looking stretched and global macro concerns such as slowdown in China and geo-political tensions remain high, investors would resort to profit-taking at regular intervals and also bet on select stocks going ahead," he added.

Here's are the key factors which lifted the markets sentiments on Dalal Street:

The US Federal Reserve policy outcome
The US Federal Reserve will announce the outcome of its monetary policy meeting later today, which will have its impact on the Indian markets on Thursday. The markets have dialled back expectations on the speed and scale of US rate cuts in the face of strong economic data and pushback from central bankers.

However, no change in the interest rate is expected in this policy but the global markets will be watching the Fed on the timeline and magnitude of rate cuts in the coming months. The commentary of the US Fed will also be an important factor to watch-out for the interest rate cues.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said that global markets will be keenly watching the Fed comment on the timeline and quantum of rate cuts. The first-rate cut is likely to come in June 2024.

India's interim Budget
The financial minister Nirmala Sitharaman will table the interim budget tomorrow, that is, Thursday, February 1, 2024. This will merely be a vote of account by the central government ahead of the upcoming elections later this year. However, traders are expecting some announcement regarding the fiscal deficits and infrastructure by the state.

A positive build-up was reflected in Indian markets prior to the interim budget, although expectations are low, the market anticipates a lower fiscal deficit supported by buoyant tax revenues. The overall trend in the market is akin to a seesaw, and the buy-on-dips strategy is effective as of now, said Vinod Nair, Head of Research, Geojit Financial Services.

Bond Yields
The 10-year US bond yield was heading downwards towards the 4 per cent-mark, ahead of the US Fed's policy decision. This is a positive since it will restrain FPI outflows. The decline in the 10-year yield is positive since it will restrain FPI outflows, said Vijaykumar from Geojit.

Buying in banking stocks
Banking stocks, which have been reeling under pressure lately, found some low level buying interest on Wednesday. Index heavyweights including HDFC Bank, ICICI Bank, Axis Bank and State Bank of India cumulative contributed more than 270 point rise in the Sensex. Even select PSU lenders surged up 7 per cent during the session amid the renewed buying interest.

IMF's forecast
The International Monetary Fund (IMF) has raised its 2024-25 GDP growth forecast for India by 20 basis points to 6.5 per cent, although it continues to trail expectations of Indian authorities. The IMF has also raised its growth forecast for 2025-26 by 20 basis points to 6.5 per cent.

The IMF’s forecast of India’s GDP growth remains strong at 6.5 per cent for 2024 and 2025 led the Indian market cheer, said Avdhut Bagkar Technical and Derivatives Analyst, StoxBox. "We believe that market participants will focus on fiscal deficit and its glide path since growth with stability is hugely important," he said.

Global optimism
Global markets including Europe eked out gains on Wednesday as investors waited for clues on when the US Federal Reserve may start to cut interest rates, with the dollar heading for its biggest monthly gain since September. The MSCI world equity index, which tracks shares in 47 countries, added 0.1 per cent.

Technical set up
Nifty has formed a Piercing Line pattern on the daily chart, following a dark cloud cover in the preceding trading session. This consecutive complete reversal pattern indicates a highly volatile market sentiment, said Rupak De, Senior Technical  Analyst at LKP Securities.

"The trend may continue to be volatile on Thursday, especially as the interim budget will be delivered. Support on the lower end is situated at 21,500, while a decisive move above 21,750 might trigger a rally towards 22,100 and beyond," he said.
 

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