Benchmark indices ended the day sharply higher, with the Sensex jumping a huge 610 points, while the Nifty was up 194 points in trade. Here are five reasons why the markets jumped in trade.
Dow Jones jumps 400 points on strong US jobs data
The U.S. economy added 313,000 jobs last month, above forecasts, while wage growth came in below expectations.
This led to a sharp rally in the Dow Jones of more than 400 points on Friday. Indian markets took cues from the global markets with the Sensex adding 300 pointsand the Nifty 95 points.
Markets tend to open a little higher on Monday, as investors tend to take fresh positions. Interestingly, however, banking stocks were very subdued and the market rally was led by names like ITC, Tata Steel and Sun Pharma.
Lower than expected inflation data
Markets also rallied on the back of reports that the CPI inflation data may come in weaker than expected.
Inflation data is expected at 4.7 percent in February from a year ago, slowing from 5.07 percent in January.
Last week benchmark bonds advanced and bond yields fell on anticipation of lower inflation. When bond yields fall, stock markets tend to rise and this is what may have happened today.
Strong cues from across Asia
Asian markets too had very robust openings, following the cues from across Asia. The Japanese Nikkei 225 was up 1.70 percent, or 363 points, though initially it gained as much as 400-points in trade.
The broader Topix rose 1.34 percent, with gains seen across all of the index's sectors. The Korean Kospi was up almost 1 per cent in trade.
The Hong Kong's Hang Sang was also up more than 1 per cent, led by a rally in tech stocks.
Short covering rally
The markets were in an oversold zone, as last week the markets lost more than 2 per cent. It was largely felt that there would be a bounce back, though one is not sure if this is a dead cat bounce.
The gains were largely on account of a short covering rally.
However, today's rally did not see any significant gains in the banking sector and was largely restricted to the FMCG and the IT sector.
It would be interesting to see if there are any gains in the banking sector in the coming days.
The rupee also gained in trade and was above the 65 levels mark at 64.97 to the dollar. The rupee had closed the week at 65.15 to the dollar. Check rupee rates against other world currencies