Sensex surges 2,300 points as bulls take charge on Dalal Street

Benchmark stock market indices surged on Wednesday, as D-Street bulls led a recovery rally, after seeing the worst day in 4 years a day before.

The S&P BSE Sensex was up 2,303.19 points, or 3.2%, to 74,382.24, while the NSE Nifty50 gained 735.85 points, or 3.4%, to 22,620.2

"Indian market exhibited a spirited recovery driven by broad-based buying across various sectors, as political stability appears assured. However, attention will remain on the formation of the government and the forthcoming RBI policy meeting," said Vinod Nair, Head of Research, Geojit Financial Services.

He further added that the market does not expect any change in RBI’s policy stance given persistent high food inflation, and an expectation of an increase in government spending, which has led to a notable traction in FMCG stocks.

Sensex, Nifty closed 6% lower, marking their worst session since March 2020.

Heavyweight bank stocks surged by 4.5%, while the financial services index jumped by 4.2%. Both indexes had dropped nearly 8% on Tuesday.

The Nifty volatility index fell to its lowest since May 27, at 18.66.

"Technically, the index has crossed the hurdle of the 100-Day Exponential Moving Average (100-DEMA) and formed an insider bar candlestick pattern on a daily scale. The 100-DEMA is placed near 22,050 levels. As long as the index holds above 22,050, bullish momentum will continue. On the upside, 23,000 and 23,350 will act as resistance in the short term," said Neeraj Sharma, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates Ltd.

Meanwhile, foreign institutional investors (FIIs) sold a record about $1.5 billion worth of shares on Tuesday, according to provisional data from the National Stock Exchange.

Consumer goods stocks surged by 4%, while auto stocks increased by 4.2% on expectations of rising rural demand. IT stocks were up by 2.4%.

Adani Ports surged by 8.5%, becoming the top gainer in the Nifty 50 index after falling more than 21% in the previous session. Larsen and Toubro Limited was the top loser, shedding 3.25%.

"Broad policy continuity, macroeconomic resilience, and strong growth fundamentals should keep the relative appeal for Indian equities intact," Goldman Sachs said in a note.

"We also expect foreign flows to return now that this event risk is behind us, especially considering the weak flows so far this year and the multi-year low foreign positioning," Goldman added.