Bulls stage turnaround on Monday; key reasons why Sensex rallied 850 pts

After a dismal first week of 2023, domestic equities staged a strong turnaround on Monday in line with gains across their global peers.

The BSE Sensex rallied over 950 points to an intra-day high of 60,861 and the NSE Nifty jumped 270 points to reclaim the 18,100 level. Both the indices eventually closed 847 points and 242 points higher, respectively.

The rally was spearheaded by IT shares with the Nifty IT index rising over 2 per cent intra-day. Other sectoral pockets also held firm gains.

TCS gained 3 per cent ahead of its scheduled December quarter result announcement today.

Moreover, the sentiment got a boost from jobs and services data in the US, which hinted at a cooling economy prompting bullish bets from investors.

“The US economic data released on Friday is significant from the global market perspective. All data points hint at a strong but cooling US economy, which indicate the rising possibility of a soft landing for the US economy. This points to cooling inflation and the possibility of the Fed going less hawkish in 2023. The market has already started discounting this with the dollar index declining below 104 and the US 10-year bond yield declining by 12 bps. All signals are bullish,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Here’s a detailed snapshot of key reasons that led to Monday’s rally:

US economic data: Investors assessed the December jobs report as an indication of a cooling labour market. The nonfarm payrolls in the US rose by 223,000 last month, below November’s pace but beat the forecast of 200,000. On the other hand, wages grew at a slightly slower-than-expected pace, rising 0.3 per cent versus an estimate of 0.4 per cent.

The ISM Services data also contracted to 49.6 against the 56.5 figure in November, which was read as a sign of easing inflation and hence likely slower rate hikes.

Global stocks: Powered by the positive data, US benchmark indices soared over 2 per cent each on Friday, which was the best day for the Dow and S&P 500 since November 30 and the best for the Nasdaq since December 29.

Asian markets also mirrored the overnight rally in their US peers. Kospi and Hang Seng indices rose the most across the region today, up 2 per cent and 1 per cent, respectively.

End to China’s zero Covid policy: China opened its border for international travellers over the weekend, signalling the end of the zero-Covid policy which had kept borders effectively closed since the first outbreak of Covid-19 in 2020. The move has cheered market sentiment as investors hope that life in the East-Asian country is now swiftly set to move forward.