Rs 7.26 Lakh Crore Wealth Created In 1-Day; Why Sensex Rose By 1,400 Pts & Nifty Surged 420 Pts On August 16?

Lakhs of crores of wealth have been created in a single day due to a strong rally on Sensex and Nifty on August 16. After a volatile week, a band of bulls drove the Sensex to rise by more than 1,400 points and the Nifty 50 to surge by over 420 points. The merriness in the Indian stock market is owing to broad-based buying that emerged across sectoral indices amid positive global cues. Investors created over Rs 7.17 lakh crore on August 16 alone.

Sensex soared by 1,330.96 points or 1.68% to end at 80,436.84. While Nifty 50 zoomed by 397.40 points or 1.65% to finish at 24,541.15.

At the closing price, the BSE-listed company's market cap came in at Rs 4,51,46,680.67 crore or $5.38 trillion. This is up by Rs 7,17,236.98 crore from a market cap of Rs 4,44,29,443.69 crore.

Overall, on the day, Sensex skyrocketed by 1,412.33 points to hit an intraday high of 80,518.21. Its counterpart Nifty 50 also held a bullish trend, advancing by a whopping 420.15 points to touch the day's high of 24,563.90.

Top gainers are stocks like Tech Mahindra, M&M, TCS, Tata Motors, TCS, Ultratech Cement, HCL Tech, ICICI Bank, Tata Steel, Adani Ports, Nestle, ITC and IndusInd Bank which gained by 2-4%. On the other hand, Sun Pharma was the only stock in red on Sensex, however, the decline was broadly marginal.

On BSE, out of 4,036 stocks traded, 2,464 stocks advanced, 1,466 stocks declined and only 106 stocks remained unchanged. Meanwhile, 202 stocks touched a new 52-week high, and only 46 stocks touched 52-week lows. Further, 326 stocks hit upper circuits, and 266 stocks clocked lower limits.

Meanwhile, on the NSE, 95 stocks touched 52-week highs, and only 31 stocks touched new 52-week lows. Furthermore, 112 stocks touched their upper limits and a meagre 76 stocks hit lower limits.

Why did the Sensex and Nifty rise on August 16?

Santosh Meena, Head of Research, Swastika Investmart Ltd said, "Indian markets joined the global rally today, rebounding after a brief period of underperformance driven by FIIs' selling in both the cash and F&O segments. Concerns over slightly weaker earnings, high valuations, and the Hindenburg issue had weighed on the market recently. However, a shift in global sentiment from panic to optimism has fueled today's upturn."

Several factors have contributed to this bullish momentum. As per Meena, the fear of a reversal in the yen carry trade has subsided, and strong retail sales figures, along with better-than-expected job data, have alleviated concerns about a potential U.S. recession. Additionally, the market is now fully pricing in a 25 basis point rate cut by the U.S. Federal Reserve in September, further boosting investor confidence.

Meena further said, "FIIs have turned net sellers in index futures this week, but today's trading session has seen a significant short-covering move. If the Nifty can sustain above its 20-DMA, around 24,500, the bullish momentum could extend towards the 24,800-25,000 zone. On the downside, the 24,200 level now serves as a key support."

Furthermore, Vishnu Kant Upadhyay, AVP, Research and Advisory at Master Capital Services explained that the Indian benchmark indices opened on a strong note, buoyed by positive global cues as better-than-expected U.S. economic data alleviated recession fears in the world's largest economy. The Nifty50 surged over 300 points, while the Sensex gained more than 1,000 points, trading at 24,455 and 80,150, respectively. In July, U.S. consumer price inflation dropped to 2.9%, the first time since March 2021 that it has fallen below 3%. Jobless claims also decreased to 227,000, the lowest in five weeks, against market expectations of 236,000.

On key indices performance, Kant said, the IT sector extended its rally for the fifth consecutive day, rising nearly 2.5%, as softer inflation strengthened the case for a Federal Reserve rate cut in September. Technically, the market has broken above the 21-day EMA and the crucial resistance zone of 24,400-24,450, where heavy call writing was observed.

"We expect the uptrend to continue, with potential targets at 24,800-24,850. Any dip towards 24,350 is likely to attract fresh buying," Kant added.

Also, as per Vinod Nair, Head of Research, Geojit Financial Services, the stability of the JPY has been instrumental in driving a global market recovery. Besides that, the strong U.S. retail sales and a decline in weekly jobless claims have helped alleviate fears of a U.S. recession. Further, the market sentiment has improved due to a decrease in U.S. CPI inflation. On the backdrop of these, the Indian IT firms exhibited strong buying interest. Domestically, the Indian CPI inflation rate has fallen below the estimate, signalling optimism. However, challenges such as a drop in WPI inflation, weak IIP, and lukewarm Q1 corporate earnings suggest that market gains may be limited, which is reflected by FIIs maintaining a net seller position.

Going ahead, Ajit Mishra - SVP, Research, Religare Broking said,"With the Nifty breaking out of its consolidation phase, it appears poised to close the gap around the 24,700 level. If there is any dip, the 24,300-24,400 zone should provide support. We recommend aligning trades with a focus on stock picking. In the absence of any major domestic triggers, attention will remain on global market performance for further cues."