Sensex and Nifty staged a strong comeback surging up to 1.5 percent intraday on Tuesday. This rally comes despite a rout in Wall Street following concerns over China's latest AI development. The rally in the domestic equity markets was seen after two straight days of steep decline driven by intense buying in banking and rate-sensitive stocks as the RBI decided to inject liquidity into the financial system.
Sensex climbed 535.24 points or 0.71 percent to settle at 75,901.41. During the day, the benchmark surged 1,146.79 points or 1.52 percent to hit a high of 76,512.96. Nifty appreciated by 128.10 points or 0.56 percent to close at 22,957.25. In the intraday session, the NSE Nifty climbed 308.8 points or 1.35 percent to 23,137.95.
Key Factors Driving the Market Rally
1) Banking Stocks Lead the Surge: Banking stocks emerged as the top gainers after the RBI announced liquidity-boosting measures. Nifty Bank rose 2 percent, with private lenders like HDFC Bank, Axis Bank, and ICICI Bank among the top gainers. Rate-sensitive stocks, including LIC Housing Finance, Bajaj Finance, and Mahindra & Mahindra Financial Services, also gained between 1.5 - 4 percent.
Ajit Mishra, SVP at Religare Broking Ltd, commented, "ICICI Bank's stellar results coupled with RBI’s liquidity infusion created a conducive environment for financial and banking stocks to outperform." ICICI Bank reported a 15 percent year-on-year rise in profit after tax (PAT) to Rs 11,792 crore.
2) Recovery From DeepSeek R1 Fears: The global markets were jolted on Monday after China launched its DeepSeek R1 AI model, sparking a sell-off in technology stocks. The S&P 500 fell 1.5 percent, while the tech-heavy Nasdaq 100 plunged 3 percent, driven by concerns over the potential challenge to Nvidia’s dominance in the AI space.
Indian markets had also reacted sharply, with Sensex shedding 824 points to hit a seven-month low on Monday. However, Tuesday saw selective buying as analysts ruled out a significant impact of DeepSeek R1 on Indian firms.
"We are witnessing recovery after the panic selling as the DeepSeek R1 announcement may not directly impact Indian companies," said Kranthi Bathini, Equity Strategist at WealthMills Securities.
3) Oversold Markets Spark Pullback: After the recent correction, domestic markets entered an oversold zone, prompting a technical recovery. Ruchit Jain, Vice President at Motilal Oswal Financial Services, noted, "The U.S. Dollar Index and bond yields have corrected from their highs, which is positive for our markets. A pullback was expected under these conditions."
Technical Outlook
Rupak De, Senior Technical Analyst at LKP Securities noted "The Nifty remained volatile throughout the session before closing below 23,000, reinforcing bearish sentiment in the market. In the near term, the index is likely to remain under bearish control as long as it stays below 23,000 on a closing basis. On the downside, immediate support is placed at 22,800, and a breach below this level could lead to a decline toward 22,500. Conversely, a close above 23,000 might provide some short-term relief to the market."
Sneha Jain, Smallcase Manager and Founder at Wealth Trust Capital noted a support zone of 22,000 saying this level represents a significant area of fundamental support with Put OI of 22,000 at 100.54 lakhs. A breach below this could signal deeper corrections, but a sustained hold here would indicate resilience. "For a meaningful recovery, the Nifty must regain and sustain above a recovery zone of 23,200–23,400. Strong earnings growth and institutional buying would be key drivers," she added.
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