5 Factors That Drove Sensex's 1,850 Points Rally On 20 March

After four consecutive sessions of carnage in the stock markets, Indian benchmark indices recovered even as coronavirus infection cases in India continued to rise. BSE's Sensex rose over 1,850 points in the afternoon session to 30,167.68 and NSE's Nifty 50 surged above 8,700 points.

Here are the factors that could have caused the rally, however, analysts warn that the surge may be short-lived amid the currently vulnerable time.

1. Rally in IT stocks

While all sectoral BSE indices were in the green, the rally was led by IT stocks. BSE's IT index was up by 10 percent after the dollar index (which measures the US dollar against other major currencies) surged to a 3-year high on safe-haven buying.

Dollar income is a significant part of the revenues made by Indian software exporting companies as well as those involved in the KPO businesses.

2. A surge in global markets

Stock markets in the Asia Pacific rose on Friday after China announced that it will keep its loan prime rates unchanged. South Korean stocks recovered from its heavy losses see on Thursday, with nearly 7.5 percent gains. Its Kospi index advanced 7.44 percent to 1,566.15 while the Kosdaq surged 9.2 percent to 467.75.

Hong Kong's Hang Seng index jumped 3.97 percent in its final hour of trading.

3. Economic measures announced

The US government unveiled a $1 trillion economic stimulus plan to provide funds directly to businesses and the American public.

The Bank of England promised 200 billion pounds of bond purchases and cut its key interest rate to 0.1 percent, its lowest ever, in a second emergency move.

4. Oil prices recover

On Friday, international oil benchmark Brent rose by nearly 7 percent to above $30 a barrel after the US President Donald Trump hinted he may intervene in the price war between Saudi Arabia and Russia at an "appropriate time".

Recovery of oil prices also pushed energy stocks like RIL, ONGC, GAIL, HPCL and BPCL by 4 to 15 percent higher.

5. Technical correction and speculative buying

Analysts had said that the 7,800-8,000 levels in Nifty may offer some support to the index. Moreover, momentary rallies in a bear market are common and largely driven by speculators buying in order to cover their positions after a substantial fall.