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Sensex surges 693 pts, Nifty above 7,800; what drove the market rally? – Economic Times

Benchmark equity indices Sensex and Nifty advanced over 2.50 per cent on Tuesday 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 closed 692.79 points at 26,674, while the 50-share Nifty index settled 190.80 points higher at 7,801.

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

Stimulus package hopes
Market sentiment turned positive during the day 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.

In another development, Finance Minister Nirmala Sitharaman said regulators and her ministry are monitoring developments and volatility in stock markets. She said the developments on stock markets are monitored thrice a day. The government is working on an economic package to deal with the hardships caused by the lockdown to control the coronavirus crisis and the same will be announced soon, she said adding different sub-groups have held sectoral discussions.

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.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “The Fed is now leading from the front with its historic package which includes open-ended purchase of securities, direct loans to companies, purchase of corporate bonds, lending against student loans and credit card loans etc. This comprehensive package for the Wall Street and the main street is unprecedented and gives the message that the World’s largest central bank will “do whatever it takes” to mitigate the economic crisis. Other central banks can be expected to follow suit with bold measures to ease the severely strained credit and financial markets. A major package from the government of India and RBI can be expected shortly.”