Stocks rebound sharply to recover Thursday’s losses

Stocks recovered sharply on Friday and logged their biggest single-day gain since February 15th. The Sensex was able to stabilize above the 54,000 level, the Nifty 50 recovered the 16,000 mark. Friday’s gains were mainly driven by lower-level purchases at banking counters and a sharp rally in the index heavyweight Reliance Industries.

Investors followed positive signals from Asian peers after the Chinese central bank cut rates by 15 basis points (bps) for five years, negatively overnight in the U.S. market. Through Friday’s rally, both domestic benchmarks have been able to snap their 5-week losing streak and finish nearly 3% higher each week – also marking the best week since March 20 this year.

After gaining as much as 1,604 points intra-day, the Sensex rose 1,534.16 points, or 2.9%, to 54,326.39 and the broader Nifty-50 rose 456.75 points, or 2.9%, to 16,15626. Reliance Industries, HDFC Bank and ICICI Bank were the top contributors to the Sensex rally on Friday. Shares of Reliance Industries rose 5.8% on Friday – marking the best one-day gain in six months.

“Global as well as Indian equities have recovered from their sharp fall the previous day after the Chinese central bank cut its five-year lending prime rate by 15 basis points to 4.45% to stimulate economic activity. Speaking at the 7th Annual Meeting of the New Development Bank (NDB), Finance Minister Nirmala Sitharaman’s positive remarks and hints from her Asian counterparts also stirred up sentiment in the domestic market, ”said Siddharth Khemka, head of retail research at Motilal Oswal Financial Services.

Analysts further believe that overall sentiment may be positive in the coming days as Friday markets end in day highs. In addition, the fall in short cover visibility and short exposure to FIIs over the last few sessions could push the Nifty to 16,800-17,000 levels in the coming weeks. “Looking at the stability of volatility above 22 and the sharp decline in FII short exposure, we think the downside should be limited. The recent low of 15,700 should be considered as good support. We believe the short covering play will push the index to 16,800-17,000 next week, “analysts at ICICI Direct wrote in a note on Friday.

Similar to the headline indicators, broader markets also ended higher on Friday. Nifty midcap and smallcap indices rose more than 2% during the session. By sector, all 15 sectoral gauges compiled by the NSE ended higher in purchases across the board on Friday, with Nifty Metal and Pharma up 4.2% and 3.7%, respectively. Nifty Bank also rose 2.9% on Friday. Overall, of the 3,418 stocks traded on the BSE, 2,497 ended green on Friday.

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