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Sensex rises 1,500 pts from day’s low, Nifty above 22,600: key factors behind sharp recovery
Strong rupee, value buying were among key factors that led markets to stage a significant recovery on April 2
Sensex and Nifty trimmed losses after partial recovery on April 2
Value buying and a stronger rupee helped markets rebound
Nifty back above 22,350; Sensex jumps 500+ from day’s low
Benchmark indices Sensex and Nifty staged significant recovery on April 2 amid value buying and a stronger rupee. The benchmarks gained over 1.6% each from intraday lows.
At 14:16 hrs IST, the Sensex was down 70.20 points or 0.1% at 73,064.12, and the Nifty was down 30.70 points or 0.14% percent at 22,648.70. About 2,118 shares advanced, 1,701 shares declined, and 147 shares were unchanged. Sensex climbed 1,500 points from day’s low while Nifty reclaimed the psychologically important 22,600-mark. Sensex’s intraday low was 71,545.81 while that of Nifty was 22,182.55.
Sensex fell over 1,500 points earlier in the day after US President Donald Trump shattered hopes for clarity over the duration of the Middle East conflict.
Key factors behind markets trimming losses
1. Value buying
Value buying emerged on April 2 after the markets fell over 2% earlier in the day. Nifty Midcap index posted 2.3% recovery from day’s low.
Technology and allied companies were among the gainers in the Nifty 200. Shares of LTIMindtree and Coforge were up over 2% and nearly 3%, respectively, while those of KPIT Technologies were up marginally. Shares of Persistant Systems rose 2%. The Nifty IT was the sole gainer among sectoral indices, with the majority of its constituents trading higher. The sectoral index was up 1.76%.
IT shares led the gains on Nifty 50 with HCL Tech, Tech Mahindra rising 3% and 2.2% higher, respectively.
Meanwhile, all the other sectoral indices were in red but significantly off day’s lows.
2. Strong rupee
The Indian rupee posted its biggest gain in more than 12 years after authorities intensified their crackdown on speculation against a weaker exchange rate, extending curbs to offshore derivatives just days after tightening limits on banks’ local positions.
The rupee advanced as much as 2% to 92.8725 per dollar on Thursday — the most since September 2013 — as currency trading resumed after a two-day break. The gains came despite broad weakness across most regional currencies, as US President Donald Trump offered no clear timeline for an exit from the Iran war in a primetime address.
The Reserve Bank of India said late Wednesday that authorised dealers were prohibited from offering some non-deliverable contracts involving the rupee to resident or non-resident users. Banks can still offer deliverable FX contracts for hedging, but users can’t offset those trades with positions taken offshore, it said in a statement.
3. Technical reason
Analysts said that as long as Nifty stays above 22,220, investors can go long.
Markets crash 2%: Sensex tumbles 1500 pts, Nifty near 22200; six key reasons behind decline
Trump escalating Iran threat, drop in bank stocks amid RBI crackdown on rupee speculation are among key reasons to weigh on market sentiment on April 2
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Sensex and Nifty opened sharply lower amid US-Iran tensions
Trump’s Iran strike threat raised crude prices and market anxiety
Foreign investors sold Rs 8,331 crore in Indian stocks
Benchmarks Sensex and Nifty were trading in deep red on April 2 as US President Donald Trump said the US plans to launch fresh attacks on the country within the next two to three weeks, dimming hopes of a near-term end to the war that has unsettled global markets.
At 10:06 am, the Sensex was down 1,532.38 points or 2.1% at 71,601.94, and the Nifty was down 479.85 points or 2.12% at 22,199.55. About 810 shares advanced, 2,545 shares declined, and 142 shares were unchanged. Nifty 50 and Sensex fell 16% and 17% from respective life-time highs.
All 16 major sectors declined. Heavyweight financials and banks lost 1.6% each. The broader small-caps and mid-caps fell 1.5% and 1.2%, respectively.
Here are key reasons behind market crash
Trump ramps up Iran threat
Trump stopped short of outlining a roadmap to end the Iran war and said that the US will strike Iran “extremely hard” over the next two to three weeks also intensified near-term geopolitical anxiety and drove crude oil prices higher.
Asian markets dropped 1.2% after Trump said Washington’s “core strategic objectives” in the Iran war were nearing completion. However, he did not provide a clear outlook on when the conflict would end.
Trump’s comments that the U.S. will strike Iran “extremely hard” over the next two to three weeks also intensified near-term geopolitical anxiety and drove crude oil prices higher.
“With President Trump’s declaration “ we are going to hit Iran extremely hard in the next two to three weeks”, market sentiments have again turned negative. Brent crude spiked around 5% to $105 and the US 10-year bond yield again firmed up to 4.36 percent negatively impacting gold and silver prices, though marginally. President Trump’s statement that “we will finish the job in two to three weeks” cannot be taken at face value since the president has been notoriously inconsistent in all his views. He can change his position anytime**,”** said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
Copper fell with other industrial metals after Trump reiterated a threat to attack Iran’s civilian infrastructure should negotiations fail to end the month-long war.
2. Foreign selling continues in April
Foreign portfolio investors (FPI) offloaded shares worth Rs 8,331 crore on Wednesday, while domestic institutional investors (DII) bought stocks worth rs 7,172 crore, according to NSE’s provisional data.
“FPIs continued selling heavily with a sell figure of Rs 8,331 crore on April 1. The high crude price, the widening trade deficit, the fear of declining remittances and sustained FPI selling are acting cumulatively to put high pressure on the rupee which continues to decline despite RBI’s decisions on restrictions on dollar futures deals,” said Vijayakumar.
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3. Technical reason
“Inability to float above 22,770 after the upside gapped opening yesterday, point to underlying weakness. We will go in today, eying 21,900, but 22,330 may be expected to offer some buying interest. However it would require consistent trades above 22,630 to shrug off weakness,” said Anand James, Chief Market Strategist, Geojit Investments Limited.
Shrikant Chouhan, Head Equity Research, Kotak Securities said, “For traders, 22,500/72,500 and 22,250/72,000 would act as key support zones. As long as the market trades above these levels, the pullback move could continue upwards, with 22,900-23,000/73,800-74,200 acting as immediate resistance zones for bulls. Below 22,250/72,000, it could fall to 22,100-22,000/71,500-71,200.”
4. VIX rises 5%
India VIX, the volatility gauge, rose 5% on April 2 a day after falling 10%. The rise in VIX suggests that traders are pricing in short-term selling pressure.
5. Bank stocks drop
Bank stocks dropped on Thursday after the Reserve Bank of India intensified its crackdown on speculative activity in the rupee by targeting corporate arbitrage, requiring lenders to close contracts in open markets by removing leeway to sell to corporates.
Financials and banks lost 2.5% each, while the PSU bank index dropped 3.1%.
The tighter rules are a negative for banks as it may lead to higher losses, said Prakhar Sharma and Vinayak Agarwal, analysts at Jefferies.
6. Pharma stocks fall
Pharma stocks lost 3.75% after reports of Trump administration’s plans to announce tariffs on drugmakers as soon as Thursday.
The US has been considering a 100% tariff on imported branded and patented medicines.