Sensex logs biggest session gain since 2009; What triggered the bull run on D-Street today

Sensex and Nifty recorded the biggest one-day gain since 2009 in percentage terms on Wednesday and closed 6-7% higher, in line with global peers.

Sensex logged a 2,116 point rally intra day to 28,790 compared to the previous close of 26,674. On a similar note, Nifty climbed to the day's high of 8,376.75, rising 775 points higher against the last closing of 7,801.

Extending gains for the second consecutive session, the 30-share BSE barometer Sensex closed 1,862 points (6.98%) higher at 28,536 and Nifty ended 516 points or 6.62% higher at 8,318. Market breadth favoured advances with the advance-decline ratio at 3:2. Only 4 out of 30 stocks on Sensex and 11 of 50 scrips on Nifty closed in the red.

All sectors ended in the green with heavy buying seen in financials and banking scrips. Nifty financial rose over 8%, followed by 7% rally in Nifty bank and private banking, 4% gain in auto, 3% in IT and 2% rise in FMCG, realty, metal and media scrips. Pharma and PSU indices ended 1% higher today.

Gains in benchmarks were backed by index heavyweight Reliance Industries that climbed up to 22% intraday after media reports indicated that social media giant Facebook Inc was in talks to buy a 10% stake in Reliance Jio.

Sentiments turned positive as government took drastic measures to combat Covid-19 outbreak with Prime Minister Narendra Modi announcing a complete lockdown of the country for 21 days.

Equity market indices tracked bullish trend from global key indices as authorities stepped up efforts to fight the pandemic.

Overseas, Asian, European as well as Wall Street indices reversed losses as investors banked on hopes of economic stimulus from policymakers.

Vinod Nair, Head of Research at Geojit Financial Services said, "Markets rallied after the nationwide lockdown was announced, mainly driven by the Financials. Global markets have been trading in the green, driven by expectations of stimulus measures to support the respective economies and not because of any change in ground realities. A much more stable rally can happen only after news regarding the virus containment comes in."

Earlier, market indices swung between gains and losses and traded volatile on the back of rising coronavirus cases in India. Sensex opened 174 points lower today to trade at 26,499 and Nifty started 65 points lower at 7,735 level. Benchmarks turned positive in afternoon trading session, following significant growth in Asian and European peers.

Finance minister Nirmala Sitharaman also said on Tuesday the government would soon announce a fiscal package that further strengthened investor sentiments.

S Ranganathan, Head of Research at LKP Securities,'Market today mirrored the buoyancy displayed by the Dow on expectations of a stimulus package. As outlined by us in our Strategy Note yesterday, valuations below long-term averages do invite long term investors as MCAP/ GDP neared GFC lows yesterday. Although participation by institutional Investors was less today, we witnessed broad-based strength in large caps and high-quality midcaps".

Global Cues

European peers also started the day's trade higher following global cues as US lawmakers edged towards a mammoth stimulus package to support the world's top economy against the impact of the coronavirus pandemic. Where FTSE gained 2.9%, CAC was up 3% and DAX was trading 3.1% higher today.

Elsewhere in Asia, Nikkei traded 8% higher, followed by a 6% rise in SGX Nifty, and over 5% rise in Kospi, Strait and Set Composite. Where Hang Seng and Taiwan index rose 3%, the Shanghai index was up 2%.

The Dow soared on Tuesday to its biggest one-day percentage gain since 1933 and later closed 8% higher.

Near-term outlook

In technical terms, daily market statistics suggest that Nifty is trading below its key moving averages of 50, 100, 200 days SMA's (Simple Moving Average) indicating negative bias in the short to medium term. Both Sensex and Nifty continue to remain in a downtrend in the short to medium term, indicating sell position. On NSE, Bank Nifty, metal, pharma and PSU Banks are also suggesting oversold position in the short-term as well as medium-term trend.

Amit Shah, Technical Research Analyst with Indiabulls Securities said, "A phase of relief rally seems to be unfolding and once the index sustains above 8,300 zone expect a larger recovery towards 9000 plus."

Virus outbreak and impact

Globally, Covid-19 infection cases have risen drastically outside China, hurting major economies and disrupting supply chains. Since early March, authorities worldwide have stepped up efforts to fight the pandemic and announced several financial stimuli. There are over 4 lakh confirmed cases and 17,451 deaths from the coronavirus outbreak. Of these, over 1 lakh have recovered globally.

The number of infected cases in India has increased to 519, with 469 active cases & 39 recovered cases. The death toll from coronavirus in India has risen to 10 till Wednesday.

On the back of this, Indian indices have been the top laggards among the key global indices, since the average peak achieved in February 2020. Since then, Brazil index has fallen 40%, followed by India, where the decline stands at 36%. Compared to this, other key indices average decline stands around 31-28% from the peak.

Since yesterday's closing, FIIs have offloaded shares worth Rs 56,390 crore in the current month and Rs 73,080 crore since the beginning of the year 2020.

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