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Sensex surges 1,000 pts, Nifty above 7,800; what’s driving market rally? – Economic Times

Benchmark equity indices Sensex and Nifty advanced over 4 per cent in Tuesday’s trade on hopes that the government may soon announce an economic package to soften the blow from the lockdowns in several parts of the country due to the Coronavirus pandemic. Global cues were also favourable, with Asian and European market putting up a good show.

The 30-share Sensex was up nearly 1,110 points at 27,090 at around 1.50 pm (IST), while the 50-share Nifty index traded 314 points higher at 7,924 at around the same time.

Here’s a look at the key factors that lifted the market on Tuesday:

Commentary from Finance Ministry

Market sentiment turned positive after the Finance Ministry declared the government expenditure system as an essential service, implying that all its payment functions will run normally to ensure that there are no delays in transfer of funds to meet any emergent needs amidst the coronavirus crisis.

Finance Minister Nirmala Sitharaman in her tweet said, “Even as we are readying an economic package to help us through the Corona lockdown (on priority, to be announced soon) I will address the media at 2pm today.”

Liquidity support from RBI

In a bid to provide additional liquidity to the system hit by the coronavirus outbreak, the Reserve Bank of India (RBI) has decided to inject Rs 1 lakh crore and assured such move further also if required. The first tranche of term repo worth Rs 50,000 crore was conducted on March 23, while the second tranche of the same amount is scheduled for March 24.

US Fed goes all in

Market sentiment got a boost after the US Federal Reserve in a statement overnight said it will do anything in its capacity that is needed to steady the financial system, which helped soothe investor sentiments. While most of the planet goes into lockdown, traders gave massive thumbs up to the US central bank’s pledge to essentially print cash in a move not seen since the global financial crisis more than a decade ago.

The Fed, which has already slashed interest rates to record lows, said it will buy unlimited amounts of Treasury debt and take steps to lend directly to small- and medium-sized firms hammered by restrictions across the country.

S Ranganathan, Head of Research at LKP Securities said, “Emerging markets have already witnessed outflows of $83 billion since the beginning of the crisis and although the asset purchase program of the Fed is commendable the markets shall see improvement only when the economy is allowed to come back to life.”