After ten consecutive sessions of decline, the domestic equity markets made a strong comeback on Wednesday, with benchmark indices surging over 1%. The BSE Sensex climbed by more than 760 points to reach 73,756.15, while the NSE Nifty gained 268 points, crossing the 22,300 mark to trade at 22,349 as of 11:49 AM.
Leading the gains on the Sensex were Mahindra & Mahindra, PowerGrid, Tata Steel, Adani Ports, and NTPC.
Why Is the Market Rising Today?
- Indications of Tariff Relief from the US
A significant factor behind today’s rally is the statement from US Commerce Secretary Howard Lutnick, hinting at possible tariff relief. The US may announce a pathway to reducing tariffs on Mexican and Canadian goods under NAFTA as early as today. This has fueled positive sentiment in global and domestic markets.
- Surge in Midcap & Smallcap Stocks
Indian investors are increasingly buying smallcap and midcap stocks. On Wednesday, while the Sensex rose by 1.16%, the smallcap and midcap indices jumped 2.17% and 2.29%, respectively. Notably, on Tuesday, even as benchmark indices closed in the red, smallcaps and midcaps maintained gains, indicating strong investor interest in these segments.
- Strength in Asian Markets
Asian markets, particularly Hong Kong’s Hang Seng, displayed strength, positively influencing domestic equities. The Hang Seng Index surged nearly 2% amid China’s plans to boost its economy, including issuing $179 billion worth of special treasury bonds this year. Japan’s Nikkei index also traded higher, further reinforcing optimism.
- Value Buying Amid Oversold Conditions
The recent decline in the markets, which pushed the Nifty below the crucial 22,000 support level on Tuesday, created an attractive buying opportunity for investors. Analysts believe the oversold market conditions led to a short-term rebound.
Rajesh Bhosale, an analyst at Angel One, told Reuters, “The recent sell-off breached multiple support levels, but oversold conditions in the market presented buying opportunities, setting the stage for a potential short-term rebound.”
- Market Nearing a Medium-Term Bottom
Brokerage firm Axis Securities, in its latest report, noted that the market is approaching a medium-term bottom and suggested that investors consider allocating long-term funds between Nifty levels of 21,700 and 22,000.
Axis Securities’ report, titled ‘India Equities Exclusive’, stated, “While a clear bullish trigger is yet to emerge, historical patterns, technical indicators, and sectoral valuations suggest that the market is nearing a medium-term bottom.”
The benchmark Nifty 50 has now lost nearly 16% from its record peak of 26,277 in September. This marks the sixth-biggest decline from a major swing high since the 2008-09 financial crisis and the second-largest drop since the COVID-19 crash in March 2020. With February closing in negative territory, this downturn has now extended to five months, a streak last seen in November 1996.
