The equity benchmarks staged a sharp trend reversal on Thursday, with the Sensex soaring nearly 1,400 points and the Nifty reclaiming the 25,000-mark for the first time in seven months, as heavy buying in metal, auto, IT and realty counters lifted investor sentiment.
Rising for the second day, the Sensex jumped 1,200.18 points or 1.48 percent to settle at a seven-month high of 82,530.74. Sensex rallied 1,387.58 points or 1.7 percent to hit a day's high of 82,718.14 in the second half of the session. The Nifty surged 395.20 points or 1.6 percent to settle at a seven-month high of 25,062.10. The index had closed above 25,000 on October 17, 2024, previously.
The sharp upmove came amid a positive turn in global cues and renewed optimism over a potential India-US trade pact, with comments from US President Donald Trump bolstering investor morale.
Shares of Hero MotoCorp, JSW Steel, Tata Motors, Shriram Finance and HCL Technologies were among the top gainers on the Nifty, climbing up to 6 percent during the day.
Here are the key factors behind Wednesday’s sharp market recovery:
1. Hopes of Early India-US Trade Deal: Investor sentiment received a strong boost after US President Donald Trump said India had offered a "no tariffs" trade deal to the United States. Speaking at a meeting with business leaders in Doha, Trump said, "It is very hard to sell in India, and they are offering us a deal where basically they are willing to literally charge us no tariffs," reported Reuters.
New Delhi is keen to finalise a deal within the 90-day pause announced by the US in April on proposed tariff hikes for major trade partners, which earlier included a 26 percent duty on Indian goods.
Trump's comments signal that India has agreed to effectively drop all tariffs on U.S. goods as part of a potential trade deal, which the markets are taking a positive, said Kranthi Bathini, director of equity strategy at Wealthmills Securities.
However, the optimism could be short-lived as the final draft and finer contours of the India-U.S. trade deal would be crucial for the market rally to sustain, Bathini said.
2. Fall in Crude Oil Prices: Crude prices declined in futures trade, easing worries over imported inflation and boosting the outlook for corporate margins. On Thursday, crude oil futures dropped by Rs 137 to Rs 5,264 per barrel amid weak global demand cues. Declining oil prices are seen as positive for India, which relies heavily on imports to meet its energy needs.
3. Rally in Rate-Sensitive Stocks on Rate Cut Hopes: Realty and metal stocks witnessed strong buying interest, supported by expectations of a rate cut by the Reserve Bank of India. Retail inflation cooled sharply to 3.16 percent in April, down from 3.34 percent in March and 4.83 percent a year ago. The softer-than-expected inflation reading has strengthened hopes of monetary easing in the upcoming June policy review.
4. Continued FII Inflows: Foreign institutional investors (FIIs) remained net buyers of Indian equities, purchasing shares worth Rs 931.80 crore on Wednesday. The steady flow of foreign funds further supported the market’s upward momentum.
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