A firm trend in the global equity markets on the back of lower crude prices propelled the Indian benchmarks on Tuesday to clock their best-ever single day gain in over four months.
The 30-share Sensex gained 917.07 points, or 2.3%, to close at 40,789.38 as 28 of its constituents ended the day in positive territory. Stocks such as HDFC Bank, M&M, Hero Motocorp, Tara Steel, Power Grid Corporation, Bajaj Finance, HDFC and ITC all gained over 3% each.
The broader Nifty ended the day at 11,979.65, up 271.75 points or 2.32%.
Market participants attributed the rally to the recent drop in crude prices that fell below $50 per barrel during intraday trades which, in turn, pushed up equities globally. The fall was on account of concerns related to decreasing demand following coronavirus outbreak.
Incidentally, crude prices last touched these levels almost 13 months ago and are currently 20% lower than the highs witnessed in January, thereby entering a bear market, by definition.
According to Shrikant Chouhan, senior vice-president, equity technical research, Kotak Securities, a combination of factors, including a significant fall in crude prices, a rise in the Indian rupee and positive Asian markets, along with encouraging data points fuelled the rally on Tuesday.
The Purchasing Managers' Index (PMI) data released on Monday showed that the country's manufacturing activity expanded in January at its quickest pace in nearly eight years.
Meanwhile, leading indices such as the Hang Seng and Kospi both gained over 1% on Tuesday even as all other Asian markets ended with gains. Chinese benchmarks also ended up over 2%. In India, equities saw broad-based buying as gainers outpaced declines by nearly 2:1. On the BSE, more than 1,600 stocks gained ground as against 892 declines.
Interestingly, foreign portfolio investors (FPIs), who had been mostly net sellers in the last few trading session, bought equities worth ₹366 crore on Tuesday.