Benchmark indices saw sharp rebound from day's lows on September 3 with Sensex rising 550 points from day's low and Nifty trading above the 24,700 level.
On September 3, Sensex closed 409.83 points or 0.51% higher at 80,567.71, and the Nifty closed 135.45 points or 0.55% higher at 24,715.05. About 2,415 shares advanced, 1,333 shares declined, and 116 shares were unchanged. Day's low of Sensex was 80,004 while the intraday low of Nifty was 24,533.
Here are the factors that are driving the market recovery.
Metal rally
Metal shares rallied for third straight day on September 3 with Tata Steel and Jindal Steel & Power leading the gains by rising 6% and 5.5%, respectively amid China tightening supply and weaker dollar. Shares of SAIL and Hindustan Copper closed trading 5.26% and 4.7% higher, respectively.
On September 3, Nifty Metal index closed trading 3.1% higher at 9,676 and was the top sectoral gainer on Nifty.
This comes amid China's 'anti-involution' campaign to curb excess capacity and price wars in energy and solar supply chains.
China will lower its steel capacity by 50 million tonnes in 2025 and cut production by 8.5% for the rest of the year, global brokerage firm CLSA said, reported CNBC-TV18.
"We expect steel prices to pick up in line with global trajectory and strong seasonality as the worst looks behind for the metal sector," said analysts at CLSA, citing gains for Indian metal companies from China's "anti-involution" plan.
The broking firm has tweaked the estimate for earnings before interest, tax, depreciation, and amortisation of metals and mining companies under its coverage by (-)4% to 8% over 2025-26 (Apr-Mar) to FY28. These changes in the estimate of EBITDA reflect recent price trajectory and the June quarter results. It has also adjusted the target price of these stocks by (-)3% to 6%.
CLSA continues to prefer the non-ferrous metals, specifically aluminium, due to its tighter demand-supply balance. It relatively prefers Jindal Steel & Power given its strong capacity addition-driven growth outlook. CLSA favours Hindalco Industries and Vedanta within the sector.
GST optimism
FMCG and consumer durable sectors were trading higher on September 3 as a two-day meeting of the Goods and Services Tax Council kicks off, where consumption-boosting tax cuts are expected on a range of goods.
Amid hopes of GST cuts, auto and pharma indices closed at day's high on September 3.
"GST 2.0 could be the spark that India’s consumption story has been waiting for. By collapsing tax slabs into a simpler structure, everyday essentials and big-ticket purchases alike may soon get cheaper, setting the stage for a festive-season demand surge. Add to that higher rural incomes, women-centric cash transfers, and cooling inflation, and the makings of a broad-based revival are in place. From FMCG and retail to durables, autos, and even cement, multiple sectors are positioned to benefit. The real kicker, however, will be execution—whether policy follow-through is smooth and companies pass on cost savings to consumers. If reforms are locked in by October 2025 as planned, India could be on the cusp of its strongest consumption upcycle in more than a decade," said Wright Research in a statement.
“GST 2.0 represents one of the most pro-consumption policy moves in recent years. By reducing prices in everyday categories and big-ticket durables alike, the reform could accelerate demand just as rural incomes and inflation trends are turning favourable,” said Sonam Srivastava, Investment Manager on smallcase and Founder at Wright Research.
India VIX eases nearly 4%
India VIX nearly eased 4% to 10.96 on September 3, which suggests markets might see lower volatility. Markets usually rally when VIX eases.
"The Q1 GDP growth number at 7.8% indicates growth momentum in the economy. This will get accelerated by the coming reforms in GST. The net result of all these can be an upward revision in the earnings growth for FY26 and FY 27. This has the potential to turn FIIs into buyers in India triggering a rally in the market. This is a likely scenario which can play out in a few weeks.
"Also, the situation may dramatically change if the US Supreme Court disallows the appeal from the US administration regarding Trump’s tariffs. Volatile days ahead. Investors should stay invested and slowly accumulate high quality, fairly valued stocks," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
Positive global cues
Sharp recovery was seen in US Futures with Dow Futures recovering nearly 200 points from lows and Nasdaq Futures trading 0.7% higher. Wall Street had started September on a sharply lower note on Tuesday, with the Dow losing more than half a percent, the S&P 500 shedding roughly seven-tenths of a percent and the Nasdaq sliding more than eight tenths of a percent.
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