U.S. Policy Change Hopes: Markets Jump Over 2%, Re Posts Gains

Domestic stock markets ended up more than 2% on Tuesday, helped by the rally in global markets, while the rupee also saw appreciation.

While the 30-stock Sensex at BSE jumped 1,276.66 points, or 2.25%, to close at 58,065.47, the broader NSE Nifty jumped 386.95 points, or 2. 29% to end at 17,274.3. On Tuesday, foreign institutional investors bought Rs 1,344.63 crore worth of shares in the domestic capital market on a net basis, according to provisional BSE data.

Meanwhile, the rupee gained 29 paise against the greenback to close at 81.53, from the previous close of 81.82.

The currency opened strong at 81.66 against its US counterpart, hitting an intraday high of 81.36 and a low of 81.66, before ending the day at 81.53.

Forex brokers said the rupee appreciated as the dollar index fell and there was a pullback in US yields. The surge in the domestic stock market also contributed to the rise in the currency.

Explain

US data boost

Market participants said the rally in US markets during Monday’s trading session led to positive momentum in international markets.

“Asian and European equities rallied after Wall Street’s surge overnight, fueled by hopes that weakening US economic data would prompt a policy shift from the global central bank,” Deepak said. Jasani, Head of Retail Research, HDFC Securities.

U.S. manufacturing activity grew at its slowest pace in nearly 2.5 years in September as new orders contracted, likely as raising interest rates to tame inflation dampened demand for goods .

The Reserve Bank of Australia raised its benchmark interest rate by 25 basis points against the expected 50 basis points. Britain’s decision to scrap part of a controversial tax cut plan and slightly dimmer expectations of aggressive central bank action have boosted investor confidence.

“In international markets, bond yields cooled and the dollar index came off its highs, which led to a decline in equities as many short positions were intact in the system, some of which came to cover” , said Ruchit Jain, Head of Research, 5paisa.com.

Volumes on the NSE were surprisingly low compared to recent averages. Among sectors, metals, power, IT, banking, capital goods and real estate were the biggest gainers, Jasani added.

Analysts said markets will continue to take inspiration from their global peers in the near term. “In the near term, US economic data such as ISM services and the US NFP report will provide guidance. We expect a range of 81.20 and 82.00 spot (rupee),” said Anindya Banerjee, Vice President, Currency and Interest Rate Derivatives, Kotak Securities.

Meanwhile, according to a Reuters report, the Nasdaq led Wall Street higher on Tuesday, fueled by growth in megacaps and tech stocks as U.S. Treasury yields fell.
As of 12:52 p.m. ET, the Dow Jones Industrial Average was up 713.98 points, or 2.42%, at 30,204.87, the S&P 500 was up 96.88 points, or 2.63%, at 3,775.31, and the Nasdaq Composite was up 315.72 points, or 2.92%, at 11,131.15.

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