After a rollercoaster start of the week, Indian equity markets returned to the recovery path on Tuesday (8th of April), bringing a smile to the faces of investors. Sensex and Nifty reversed sharply, opening with strong gains, jumping over 1.5% each in early trade. S&P BSE Sensex jumped 902.75 points to 74,040.65, while the NSE Nifty50 rose 290.85 points to 22,452.45 till 9:35 am. The rally was a relief of sorts after Monday’s brutal sell-off, the worst in near 10 months when fears of a global trade war and slowdown sent markets down nearly 3%. It was being dubbed as Black Monday 2.0 with fear of the infamous 1987 market crash looming large.
Tuesday’s rally did not just include blue-chip stocks. Stocks of the broader market also fared well, which indicated buying interest across the board. The Nifty Smallcap100 index gained 1.63%, while the Nifty Midcap100 gained 1.37%, indicating that investor sentiment had come back into all segments. A sharp fall in the India VIX, the market’s fear index helped to drive the bullish sentiment. Having risen more than 60% on Monday, the VIX fell 11.65% on Tuesday, which indicated lower volatility and panic in the market.
Three factors dominated the rally in Indian Stock market
First, good global cues provided a good beginning. Asian markets opened on a positive note, following a modest recovery in US equity futures. Most Asian indices, excluding Indonesia, were in the positive, which boosted Indian investors’ confidence to initiate fresh buying.
Second, technical support played an important role. Despite Monday’s decline, the Nifty remained above the critical 22,000 level. According to Kranthi Bathini, Equity Strategist, WealthMills Securities, the key support held the market and attracted fresh buying.
Thirdly, there was relief in the anxiety about the US-China trade tensions. Though the uncertainty persists, market experts believe that the conflict might remain limited to the two nations.
Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, observed that other big economies such as the EU and Japan are in talks. India, too, has begun trade talks with the US. And, of course, it is learnt that the US may refrain from imposing tariffs on pharma products, which made pharma stocks a good bet for long-term investors.
Even while Tuesday’s gains were positive, analysts remain cautious. While the trend now is positive, overhanging issues of global trade tensions and the threat of recessionary fears in the US are still out there.
Vijayakumar stated that while macro fundamentals of India are robust, the global scenario is still murky. However, he stated that with reasonable valuations, particularly in the large-cap space, this might be a good time for long-term investors to invest gradually in quality companies, especially in the financials.
