Markets rally as bonds yield; Sensex jumps 1.2%, led by bank stocks

Domestic markets surged in the final hour of trade on Tuesday as the Nasdaq futures jumped over 2 per cent amid a softening in the US bond yields. After briefly slipping into negative territory, the Sensex managed to end with a gain of 584 points, or 1.2 per cent. The index touched an intra-day low of 50,396, but finished at 51,025. The Nifty50 index rose 142 points, or 0.95 per cent, to close at 15,098.

Investor sentiment was boosted after the futures markets indicated a strong opening on Wall Street. Furthermore, the mood was lifted by the fall in bond yields and the weakening of the US dollar. The 10-year US bond yield fell about six basis points to 1.52 per cent. The rupee ended at 72.92 compared with 73.25 in the previous session.

Foreign portfolio investors (FPIs) bought shares worth Rs 2,802 crore, while domestic institutions were buyers to the tune of Rs 1,250 crore.

“Global fiscal policies as well as hopes of a swift economic rebound have improved risk appetite,” said Sriram Iyer, senior research analyst at Reliance Securities.

On Tuesday, the Organi­sation for Economic Cooperat­ion and Development (OECD) said Joe Biden’s $1.9 trillion stimulus package will help power a faster-than-expected global economic upswing. 

OECD said it expects global output to rise above pre-pandemic levels by mid-2021 after major economi­es showed greater resilience as the vaccine efficacy grows. Banking stocks accounted for the bulk of Sensex gains. Kotak Mahindra Bank was the best-performing Sensex stock and rose 3.3 per cent, followed by HDFC Bank and ICICI Bank, which rose 2.85 per cent and 2.8 per cent, respectively.

Polarised markets

While the large-cap oriented Nifty and Sensex posted encouraging gains, the broader-market small and mid-cap indices ended with losses. The Nifty SmallCap 100 index dropped nearly a per cent, while the MidCap 100 index fell half a per cent. On the BSE, 1,800 stocks declined while only 1,200 advanced.

Market players said investors are booking profits in the small- and mid-cap space given the recent outperformance. In February, the small- and mid- cap indices outperformed the Sensex by about 5 percentage points.