The benchmark Sensex gained more than 500 points on Tuesday led by strong gains in banking stocks amid optimism of an economic rebound. A rally in global financial markets as the US presidential race entered the final lap added to the positive sentiment.
The Sensex closed at 40,261, up 504 points, or 1.3 per cent. The Nifty rose 144 points, or 1.2 per cent, to end at 11,813. The Bank Nifty gained 3.2 per cent, adding to Monday’s 4.1 per cent jump. Dow Jones, the US index, was also up over 500 points to reach 27,431.08 at 9:33 pm IST.
The Nikkei Manufacturing Purchasing Managers’ Index (PMI) rose to 58.9 in October — the highest since May 2010 — igniting hopes of a strong recovery in the economy. Market players said banking stocks also rallied on hopes of a favourable verdict by the Supreme Court in the loan moratorium case later this week.
Most global markets remained upbeat as investors bet on a clear win for Joe Biden. A clear Biden win, where his party retains control of the House and wins the Senate, seems like the most favourable outcome for the markets, analysts said. Many polls suggested the likelihood of a Democratic sweep in the election. However, the race remains tight in some battleground states, some of which are seeing virus cases soar.
The factory output data of China, Europe, and the US was also cheered by investors. The US manufacturing activity rose in October, and new orders jumped to the highest in nearly 17 years. The Chinese factory activity expanded the fastest in a decade, and the Eurozone manufacturing also rose.
Market players said investors would shift their focus to the US monetary policy once clarity emerges regarding the election result. The Federal Reserve’s two-day meeting on interest rate policy will begin on Wednesday. Investors hope that it will keep interest rates unchanged. The meeting happens as the US is grappling with rising unemployment amid a rise in Covid-19 cases.
“The market was on a strong footing as US manufacturing data surpassed expectations, and a rebound was seen in Europe and China. The market is also sustaining confidence ahead of the Fed meeting, as it is not expecting rate increase,” said Vinod Nair, head of research, Geojit Financial Services.