Sensex jumps 879 points, Nifty tops 22,500 as IT stocks rally 3%

Markets rebounded sharply on Friday, led by IT buying and bargain hunting after Thursday's sell-off. The recovery eased immediate pressure, but crude prices, FII outflows and a weak rupee remain in focus.

In Short

• IT stocks soar 3%, led by TCS, Infosys, Wipro, HCLTech
• Bargain buying and short covering aid market recovery
• Rupee steady near record low; crude prices, FII outflows remain risks

Sensex ends 879 points higher, Nifty above 22,500; IT stocks rally Sensex ends 879 points higher, Nifty above 22,500; IT stocks rally 3%

Indian stock markets rebounded sharply on Friday, October 9, as buying in information technology stocks and bargain hunting after the previous session's steep sell-off lifted benchmark indices. The recovery came despite lingering concerns over elevated crude oil prices, foreign investor outflows and the Reserve Bank of India's tighter monetary policy stance.

The BSE Sensex ended 879.09 points, or 1.23%, higher at 72,472.33, while the Nifty 50 advanced 288.65 points, or 1.30%, to close at 22,520.45.

The rally followed Thursday's sharp sell-off, when the Sensex plunged 1,045.46 points, or 1.44%, and the Nifty fell 371.25 points, or 1.64%. The benchmarks recovered on Friday as investors bought stocks at lower levels and IT shares rallied despite concerns over the US government's suspension of several technology companies from its green-card programme.

The rebound also ended the prolonged losing streak in benchmark indices, although the sustainability of the recovery remains uncertain as global and domestic headwinds persist.

IT STOCKS LEAD THE MARKET RECOVERY

Information technology stocks were among the biggest contributors to Friday's gains. The Nifty IT index rose 3.02%, making it one of the strongest-performing sectoral indices.

The rally came after investors reassessed the immediate implications of the US government's suspension of major technology companies, including TCS, Infosys, Wipro and HCLTech, from the Permanent Labour Certification (PERM) programme, a key step in the employment-based green-card process.

TCS said on Friday that its applications under the programme had been in single digits over the past two years and that it did not expect the suspension to affect its workforce strategy or customer engagements. The company also reiterated its plan to hire an additional 15,000 people in the US over the next five years.

The clarification helped address some immediate concerns about the impact of the restrictions. However, the longer-term implications will depend on how the US action develops.

TCS's September-quarter results, announced on Thursday, also supported sentiment. The company's annualised artificial intelligence (AI) revenue rose nearly 20% quarter-on-quarter to $3.1 billion from $2.6 billion, highlighting growth in AI-related business.

TCS reported consolidated net profit of Rs 13,884 crore for the September quarter, up around 15% year-on-year, while revenue increased 11.2% to Rs 73,188 crore.

However, sequential revenue growth remained subdued at 0.5% in constant currency terms, suggesting that client spending continues to be cautious even as AI-related opportunities expand.

BARGAIN BUYING AFTER THURSDAY'S SHARP FALL

Another key driver of Friday's rebound was bargain buying and short covering after the steep correction in the previous session.

The sharp fall on Thursday pushed stock prices lower, prompting some investors to look for opportunities in companies they believe have strong long-term prospects. This is known as bargain buying, or buying the dip.

When prices fall sharply over a short period, investors may step in to accumulate stocks at lower valuations, providing support to the market. Traders who had bet on further declines may also buy shares to close their positions, a process known as short covering, which can add to the upward momentum.

The broader market performance reflected this recovery. The Nifty 100 rose 1.21%, the Nifty 200 gained 1.28% and the Nifty 500 advanced 1.16%. The Nifty Midcap 50 and Nifty Midcap 100 climbed 1.55% and 1.56%, respectively, while the Nifty Smallcap 100 rose 0.54%.

The India VIX, which measures expected market volatility, fell 6% to 14.36, indicating an easing in near-term market anxiety.

However, bargain buying does not necessarily mean the market has bottomed out. The rebound could remain vulnerable if crude prices rise again, foreign investors continue to sell or global bond yields remain elevated.

MOST SECTORAL INDICES END IN THE GREEN

The recovery was broad-based, with most sectoral indices ending higher.

The Nifty FMCG index rose 2.20%, while the Nifty IT gained 3.02%. The Nifty PSU Bank advanced 1.63%, the Nifty Auto climbed 1.42% and the Nifty Financial Services 25/50 rose 1.36%.

The Nifty Private Bank gained 1.32%, while the Nifty Metal and Nifty Media indices advanced 1.10% and 1.23%, respectively. The Nifty Realty rose 0.92%, and the Nifty Pharma gained 0.54%.

The Nifty MidSmall IT and Telecom index climbed 2.56%, while the Nifty MidSmall Financial Services rose 1.44%. Healthcare, consumer durables and chemicals stocks also ended higher.

The Nifty Oil and Gas index was the notable exception, slipping 0.09%.

CRUDE OIL, FII SELLING REMAIN KEY RISKS

Despite Friday's recovery, concerns over crude oil prices and foreign institutional investor (FII) selling continue to weigh on the market outlook.

Brent crude fell 1.26% to $102.97 per barrel, while US West Texas Intermediate crude declined 0.96% to $90.61, according to the market data available during the session. The easing in oil prices offered some relief, but Brent remained above $100 per barrel.

High crude prices can increase India's import bill, put pressure on the rupee and add to inflationary risks. These factors could also complicate the outlook for interest rates and corporate earnings.

Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said domestic equities staged a relief rally supported by value buying and short covering after the recent correction. He added that IT stocks outperformed on the back of a strong start to the second-quarter earnings season and rising confidence in AI-driven revenue opportunities.

However, Vijayakumar warned that persistent FII outflows and elevated global bond yields continued to temper the recovery outlook.

He said investors would await domestic consumer price index (CPI) inflation data due on Monday for further cues on the interest-rate trajectory after the RBI shifted its stance towards calibrated tightening.

The RBI raised the repo rate by 25 basis points to 5.50% and moved its policy stance from neutral to calibrated tightening. The decision added to concerns over borrowing costs and market valuations, contributing to the pressure seen after the Monetary Policy Committee meeting.

Vijayakumar said the actual performance of companies in the September quarter, which is expected to show year-on-year growth, would be critical in determining whether the market rebound can be sustained.

RUPEE ENDS NEAR RECORD LOW

The rupee ended largely unchanged at 96.73 against the US dollar on Friday, but declined over the week.

The currency remained close to its all-time low of 96.96 per dollar, reached in May, despite the RBI's recent rate hike. Adverse hedging and investment flows continued to weigh on the currency.

A weak rupee, elevated crude oil prices and continued foreign fund outflows remain key concerns for the Indian market. While Friday's gains offered relief after the sharp correction, investors will continue to track these risks alongside corporate earnings and inflation data.

For now, the rebound reflects renewed buying at lower levels and optimism around IT earnings, particularly AI-related growth. Whether the rally lasts will depend on the strength of earnings, foreign investor flows and the direction of crude oil prices and global bond yields.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

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