Markets rise for 3rd day: Sensex settles nearly 300 pts higher, Nifty ends above 25,800; five reasons behind gains

Markets recover

• Sensex and Nifty recover losses, extend gains for third session
• FII and domestic investors turn net buyers, boosting sentiment
• Falling oil prices and lower volatility aid market rebound

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Indian stock markets staged a strong recovery from their day’s lows on February 18 to close in the green for the third consecutive session, with multiple reasons supporting the intraday rebound.

Sensex closed more than 283 points higher (0.34 percent) at 83,734.25, while Nifty 50 ended the session around 94 points higher (0.37 percent) at 25,819.35. Newly-listed Kwality Wall’s shares, along with Tata Steel and ITC were the top gainers on the indices.

IT stocks like Infosys, Wipro and TechM along with Zomato-parent Eternal meanwhile led losses.

All major indices apart from IT closed in the green. Here are some of the key reasons behind the uptrend seen today:

FII buying:

According to data on NSE, foreign investors remained net buyers on February 17, net buying equities worth Rs 995 crore from the Indian stock markets. Domestic institutional investors also remained net buyers, purchasing equities worth Rs 187 crore.

"After two consecutive sessions of selling, foreign institutional investors turned net buyers on February 17, with equity purchases worth ₹995 crore. Domestic institutional investors also remained positive, extending their buying streak to the fourth session with net inflows of ₹187 crore," said Aakash Shah, Technical Research Analyst at Choice Equity Broking Private Limited.

Value buying:

The partial recovery from day’s lows may have also been driven by value-buying. Indian benchmark index Sensex has risen for the past two sessions, after falling for two sessions as trade deal boost lost steam.

Nifty 50 has also risen for the past two sessions, after a two-session gaining streak. The indices had earlier seen significant surge after India and US announced their trade deal.

Crude prices tumble:

Oil prices have been falling for the past few sessions. US President Donald Trump said yesterday that he would be involved "indirectly" in talks between Iran and the US over the former’s nuclear programme on Tuesday in Geneva, adding he believed Tehran wanted to make a deal.

Oil prices had earlier risen after Trump ramped up threats towards Iran, a large crude producer, but Iranian Foreign Minister Abbas Araghchi said "a new window of opportunity has opened." "We are hopeful that negotiation will lead to a sustainable and negotiated solution," he said, though he added that "Iran remains fully prepared to defend itself against any threat or act of aggression.”

On the other hand, representatives of Ukraine and Russia will meet in Geneva for a fresh round of US-mediated peace talks.

India VIX:

India VIX, which measures near-term market volatility, dropped more than 3.5 percent to 12.22. The reduced volatility amid easing geopolitical tensions may have also boosted the markets.

Strong buying in bank stocks:

Bank stocks, especially PSU banks, saw strong buying which further boosted the markets. The Nifty Bank index gained 0.61 percent to close at 61,545.20, nearing its record high level.

The Nifty PSU Bank index meanwhile surged more than 1 percent to close at 9,621.45, after hitting a fresh 52-week high of 9,647 earlier during the day. Punjab National Bank (PNB), Bank of Maharashtra and others led gains among the bank stocks.

Technical view:

Shrikant Chouhan, Head Equity Research of Kotak Securities, believes that 25,600/83000 and 25,500/82,700 remain the crucial support zones for traders. "As long as the market is trading above these levels, the bullish momentum is likely to continue. On the higher side, 25,800/83700 would act as an immediate resistance zone for the bulls. A successful breakout above 25,800/83800 could push the market towards 25,950-26,000/84200-84500. On the flip side, side 25,500/82700, the uptrend would become vulnerable," he said.

"In view of ongoing global uncertainties and heightened market volatility, traders are advised to remain disciplined and selective, focusing on fundamentally strong stocks during corrective phases. Fresh long positions should be initiated only after a sustained breakout of the Nifty above the 26,000 level, which would indicate a more dependable improvement in overall market sentiment," Akash Shah added.

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