The stock market witnessed a relief rally on Tuesday as Sensex and Nifty ended higher on hopes of a repo rate cut, even as yuan slide concerns eased. The Sensex closed 278 points higher at 36,976.85 while the Nifty ended near the 10,950-mark. Top gainers in the Sensex pack included Yes Bank, Tech Mahindra, Bajaj Finance, Bharti Airtel, Maruti Suzuki, Asian Paints and Hero MotoCorp -- rising upto 5.30%. Shares of PowerGrid (1.52% down), TCS (1.47% down), Reliance Industries (1.31% down), Tata Motors (0.97% down), Bajaj Auto, Vedanta, Infosys and ITC were among the major losers.
The RBI is widely expected to cut repo rate in a bid to spur the economy. "Since there is nothing ominous from macro data perspective- both global and domestic, the policy makers could well gratify the markets with a 25 bps cut in repo rates. It is prudent to have the hygiene checks in place to support the overall growth targets that we as a nation have set for ourselves," Lakshmi Iyer, CIO (Debt) & Head –Products, Kotak Mahindra AMC told Financial Express Online.
According to technical analyst Milan Vaishnav, the stock markets saw a relief rally on Tuesday. "The pullback that we saw today was purely a short-covering led technical bounce that happened as the Markets were deeply oversold. Though the broader technical structure remains bearish, we are likely to see this pullback getting extended with NIFTY facing resistance in the 11000-11050 zones," Milan Vaishnav, Consulting Technical Analyst, Gemstone Equity Research & Advisory Services told Financial Express Online. According to the expert, technical charts indicate that the markets are still oversold on the short-term charts, and we may see this bounce back getting some more room on the upside.
Notably, global brokerage firm Credit Suisse upgraded India to overweight amid an escalating U.S.-China trade war, while the government sought to cement its position by revoking seven decades of autonomy in the disputed Muslim-majority state of Kashmir, according to Bloomberg. Credit Suisse noted that India has high real rates, a negative relation with global bond yields and low sensitivity to dollar and renminbi. Worsened NBFC liquidity crunch and continued deterioration in the economy remain among concerns, according to Credit Suisse.
According to Shrikant Chouhan, Head Technical Research, Kotak Securities the markets witnessed massive short covering in fundamentally weak companies which have fallen more than 25% in last three months, implying short term bottom for the market is in place. "Bank stocks closed higher ahead of tomorrow’s monetary policy announcement," he noted.
There was also positive sentiment after Finance Minister Nirmala Sitharaman on Monday said she will meet representatives of various sectors and "fairly quickly" come out with steps to help them. "Essential idea behind these meetings is to hear from them and fairly quickly after that come up with something which will help those sectors which are giving their views to us," FM Sitharaman said yesterday. Meanwhile, the rupee settled 7 paise higher at 70.80 on Tuesday afternoon.