Sensex, Nifty Rebound After Six Weekly Falls: Can The Stock Market Recovery Last?

The Indian stock market posted gains on September 21 as lower crude oil prices, softer US bond yields and positive global cues lifted investor sentiment. The recovery came despite continued tensions involving Iran, the US and the wider West Asia.

The BSE Sensex gained 564 points, or 0.76 per cent, to close at 74,858.99. The NSE Nifty 50 rose 67.90 points, or 0.29 per cent, to settle at 23,414.30.

The market capitalisation of Indian equities, however, fell by Rs 8,516 crore in today’s session to Rs 481.52 lakh crore, as losses in broader markets outweighed gains in benchmark stocks. The Nifty Midcap 100 fell 0.29 per cent, while the Nifty Smallcap 100 and Nifty Microcap 250 declined 0.07 per cent and 0.14 per cent, respectively.

Market breadth remained weak overall. On the NSE, 1,735 stocks advanced, while 1,858 declined and 112 remained unchanged.

Among sectors, pharma and FMCG stocks led the gains. The Nifty Pharma index rose 1.16 per cent, while the Nifty FMCG index gained 0.95 per cent. Nifty Realty and Nifty Healthcare also rose 1.14 per cent and 1.10 per cent, respectively.

On the other hand, the Nifty Metal index fell 0.61 per cent. Nifty IT and Nifty PSU Bank also ended marginally lower.

Why the Stock Market Rebound Today

Here are the reasons why stock market bounced back on September 21.

1. Brent Crude Falls Below USD 102 A Barrel

The fall in crude oil prices was one of the biggest positives for Indian equities.

Brent crude extended its losing streak to four sessions, sliding over 3 per cent on September 21 to USD 101.20 a barrel. Expectations of Saudi Arabia restoring oil shipments weighed on prices, although continued Houthi attacks and the lack of progress in US-Iran talks kept supply concerns and geopolitical risks in focus.

A sustained decline in crude prices could ease pressure on the import bill, inflation and the current account. It could also reduce pressure on the rupee.

2. US Treasury Yields Ease

US Treasury yields also moved lower after a sharp rise pushed them above the key 5 per cent mark. The 10-year US Treasury yield fell to 4.95 per cent, while the 30-year yield declined to 5.28 per cent.

Lower bond yields can support equities by reducing the relative attraction of fixed-income assets and easing financial conditions.

3. Bargain Buying After Six Weekly Falls

The latest gains also came after a prolonged sell-off in Indian equities.

The Nifty and Sensex had declined for six straight weeks as investors dealt with geopolitical risks, high crude oil prices, foreign investor selling, elevated global bond yields and concerns over tighter monetary policy.

Indian equities have lost around Rs 13.70 lakh crore in market capitalisation over the past six weeks. The sustained correction has brought some stocks back to levels where investors may look for value, particularly in companies with relatively strong earnings prospects.

Vinod Nair, head of research at Geojit Investments, said improving earnings and reasonable valuations in some parts of the market are supporting the medium-term outlook for equities.

Will The Recovery Rally Sustain

In the near term, market volatility is likely to stay high as uncertainty over the West Asia crisis and the US Federal Reserve’s rate outlook continues.

Nair said, “In the near term, geopolitical developments and interest-rate expectations will remain key variables influencing investor behaviour and market direction.”

A stable geopolitical environment, lower crude oil prices and a favourable US Fed rate outlook would support Indian equities.