The benchmark indices rebounded on Tuesday, a day after posting the biggest fall in seven months amid concerns about a new strain of coronavirus detected in the UK. Both indices managed to recover close to a third of their losses on Monday.
The indices were seesawing between gains and losses for the most of Tuesday, before recovering sharply during the last two hours of the session.
The benchmark Sensex gained 453 points to reclaim the 46,000-mark; it ended the session at 46,006, a gain of 1 per cent. The Nifty rose 138 points, or 1.03 per cent, to end the day at 13,466.
Investors were slightly relived after the World Health Organization (WHO) on Monday said the new coronavirus variant could be contained using existing measures. The chief executive of BioNTech said the company was confident that its vaccine would work against the new variant.
India was among the countries that imposed a ban on flights from the UK in a bid to stop the new coronavirus strain from spreading further.
Analysts said Monday’s fall allowed investors who did not participate in the rally earlier to enter the market. “The FPI selling was not very big yesterday, and that was one indication that the situation is not very bad. Many people who felt they missed out on the rally bought. We are still in a bull market; corrections may happen, and FPI flows may not be that great as it is a holiday season,” said Abhimanyu Sofat, head of research, IIFL.
Investor sentiment got a further boost after US lawmakers approved a stimulus package worth nearly $900 billion. The stimulus package is believed to be another lifeline to the American economy, which has been battered by the pandemic. The US Senate controlled by Republicans voted late on Monday to approve the stimulus package. The House, controlled by Democrats, had voted to approve the measure earlier in the evening. The Bill will now be sent to US President Donald Trump to be signed into law.
Some analysts, however, warned that the rally in the equity markets could be fragile as concerns around lockdowns and rising Covid cases in several countries compete with positive news on the US stimulus package and the initial rollout of vaccines.
“We expect volatility to remain high in the following sessions, too. Traders should proactively manage their positions and avoid unnecessary overnight risk,” said Ajit Mishra, VP-research, Religare Broking.
As many as 118 stocks hit their 52-week high on the BSE. The market breadth was positive with total advancing stocks at 1,569, and those declining at 1,352 on the BSE. Four-fifths of the Sensex components ended the session with gains. HCL Tech was the best-performing Sensex stock and ended the session with a gain of 5.09 per cent. All the BSE sectoral indices ended the sessions with gains. IT and tech stocks gained the most, and their gauges rose 3.4 per cent and 3.01 per cent, respectively.