Indian Markets Stage Spectacular Rebound, Erasing Three-Day Losses
Indian equity benchmarks delivered a powerful performance on Wednesday, decisively breaking a three-session declining trend in a rally that analysts have dubbed a festive Santa Claus rally. The momentum was strong from the outset, with buying interest intensifying as the trading session progressed.
The Sensex skyrocketed by 1,022.50 points to conclude the day at 85,609.51. Mirroring this bullish sentiment, the Nifty 50 index climbed 320.50 points, settling firmly at 26,205.30. This robust recovery completely wiped out the losses accumulated over the previous three trading days.
Key Drivers Fueling the Market Rally
Plunging Crude Oil Prices Boost Macro Outlook
A significant tailwind for the Indian markets came from the energy sector. Global crude oil prices hovered near a one-month low, staying just above $60 per barrel. This decline is immensely positive for India's economy, as it lowers the nation's massive oil import bill, reduces pressure on the current account deficit, and cuts input costs for several key industries.
Sectors such as paints, chemicals, logistics, and aviation, which are highly sensitive to energy costs, are major beneficiaries. Analysts from JP Morgan have even projected that Brent crude could potentially fall into the $30-per-barrel range by the 2027 financial year if the current supply glut intensifies, offering a medium-term advantage.
Supportive Global Cues and Rate Cut Expectations
The positive momentum was not confined to India. Global markets provided a strong supportive backdrop, with major Asian indices like South Korea's Kospi, Japan's Nikkei 225, and Hong Kong's Hang Seng all trading firmly in positive territory.
Ponmudi R, CEO of Enrich Money, highlighted that expectations of a U.S. Federal Reserve rate cut in December were a key factor. Recent US economic data, including retail sales and producer prices, indicated softening demand and cooling inflation, reinforcing these hopes. This global optimism was complemented by domestic expectations, with experts like Vinod Nair of Geojit Financial Services anticipating a 25-basis-point repo rate cut from the RBI in December, supported by moderating inflation.
Institutional Support and Broad-Based Buying
Institutional investors played a crucial role in amplifying the recovery. Exchange data revealed that Foreign Institutional Investors (FIIs) purchased equities worth Rs 785.32 crore on Tuesday, while Domestic Institutional Investors (DIIs) were net buyers to the tune of Rs 3,912.47 crore.
The market participation was widespread, with metals, energy, and IT sectors leading the charge. Ajit Mishra of Religare Broking noted that the rebound from the crucial 20-Day Exponential Moving Average (DEMA) reinforced the prevailing uptrend. He identified the 26,300–26,500 zone as the next key resistance for the Nifty and advised maintaining a buy-on-dips approach.
Despite Wednesday's powerful upswing, market participants are advised to remain cautious as volatility has been a defining feature recently, evidenced by the sharp declines in the preceding sessions.
