 "Why Sensex, Nifty climbed in the face of multiple headwinds? Details here")
The Indian markets climbed amid mixed global cues on Tuesday. The Benchmark BSE Sensex, which opened at 75,659, touched a high of 76,512.96 in intra-day trades, while the Nifty50, which had opened at 22,960.45, touched a high of 23,137.95 during the day.
At closing bell, the BSE Sensex was at 75,901.41, higher by 535.24 points, or 0.71 per cent, while the Nifty50 was at 22,957.25, ahead by 128.10 points or 0.56 per cent.
The rally in the Indian benchmark equity indices BSE Sensex and NSE Nifty50 came a day after global markets had mostly declined on the back of intensifying competition in the generative space with the emergence of a China-backed.
Apart from that major global headwinds in terms of uncertainty surrounding the Donald Trump-led administration's tariff threats, coupled with concerns around inflation, and interest rate outlook in the US and in India, were also weighing on market sentiment. Moreover, the continued net selling of Indian equities by foreign investors has also been weighing on markets.
The RBI's liquidity infusion
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Benchmark indices, along with some sectoral indices, including the Nifty Bank, Financial Services and Auto, gained on Tuesday, after the Reserve Bank of India (RBI) on Monday announced a three-pronged measure to address tight liquidity conditions in the banking system, just 10 days before the six-member Monetary Policy Committee’s decision on the repo rate.
These steps, according to bankers, are expected to inject about Rs 1.5 trillion into the system, reducing the likelihood of further cash reserve ratio (CRR) cuts. Experts believe these steps towards boosting liquidity raise the likelihood of an interest rate cut in the February 5-7 monetary policy review. READ MORE
The RBI's move to infuse liquidity in the banking system, also drove the rate sensitive banking and financial services stocks higher, with the Nifty Bank and Nifty Financial Services gaining 2.12 per cent and 2.32 per cent, respectively, in Tuesday's (January 28, 2025) trade.
At around 3:10 PM, shares of banking stocks, some of which also feature in the benchmark BSE Sensex and Nifty50, such as ICICI Bank, HDFC Bank, IDFC First Bank, Axis Bank, Punjab National Bank and AU Small Finance Bank, among others, had climbed between 1 to 5 per cent.
Shares of NBFC companies Bajaj Finance, Bajaj Finserv and Shriram Finance had climbed between 3 per cent and 4 per cent. READ MORE
Expert View
According to market experts, apart from the rally in financial stocks, the markets have rallied on Tuesday primarily due to the oversold nature of equities in the past forthnight. "It was oversold over the last week, fortnight. Markets were getting sold out, and it had entered the oversold zone and now we're seeing some kind of buying coming in," said Gaurang Shah, Head Investment Strategist, Geojit Financial Services.
"We need to see how the week pans out in terms of F&O expiry on Thursday and the budget on Saturday, to see if the rally sustains," Shah said.
Echoing similar views, veteran market analyst Deepak Jasani said the rally can also be attributed to reduced selling pressure from foreign institutional investors.
FPIs had net sold shares worth Rs 5,015 crore on Monday, pushing the January selloff past Rs 64,000 crore, and making it the second-worst month for FPI outflows after October 2024, when Rs 92,000 crore exited Indian markets.
DIIs, however, stepped in to buy shares worth Rs 6,642 crore on Monday, providing some relief. Another reason that experts cited for the rally in the markets was the incoming flow of Decemer quarter earnings from companies that spurred stock specific actions.