D-Street rally adds nearly Rs 4 lakh crore to investor wealth: Key factors driving market higher

After seven consecutive sessions of losses, domestic equities witnessed a relief rally on Friday, helped by the Reserve Bank of India’s assurance to take necessary steps to shield the domestic economy from the global shocks.

The up move brought in a nearly 1,000-point rise in the Sensex while the NSE Nifty moved past the psychologically-important level of 17,000 points. The sharp rally in the market added nearly Rs 4 lakh crore to investor wealth as it pushed the market capitalisation of BSE-listed stocks higher to over Rs 271.97 lakh crore.

Banking pack topped the list of gainers. Nifty Bank zoomed 2.6% to 38,637.05. Stocks across the board in the pack notched gains.

Here are the key factors behind market surge:

On expected lines, the Reserve Bank of India’s Monetary Policy Committee raised the repo rate by 50 basis points to 5.9% and also retained its stance on remaining focussed on the withdrawal of accommodation.

Governor acknowledged the rising geopolitical tensions and their consequent impact on growth, but also added that the domestic conditions remain conducive, with credit growth picking up.

• Strength in rupee & bonds

Following the RBI’s decision and outlook, the rupee rose sharply against the dollar. The local currency was trading at 81.58 against the greenback as against Thursday’s close of 81.86.

The central bank’s comments that it will take adequate measures to support growth even as inflation remains the focal point soothed investors’ nerves. Appreciation of the rupee brings in capital flows into equities.

Prices of government bonds also rose as RBI’s policy action was on expected lines. The fact that the RBI did not sound too hawkish on the inflation front even though it highlighted upside risks due to global geopolitical tensions improved sentiment.

• Gains in global peers

European stocks rose, signalling a potential recovery at the end of a tumultuous week in markets. European shares edged higher, paring the longest run of quarterly losses since 2009. US equity futures also gained following another bruising session on Wall Street that took the S&P 500 down 2% to the lowest in almost two years and sent the tech-heavy Nasdaq 100 tumbling almost 4%, data from Bloomberg suggested.