Bulls were back in action on August 14 driving the Sensex higher by more than 400 points and taking the Nifty above psychological 11,000 level, after a day of selling.
The buying was seen across sectors except for Pharma that fell more than 2 percent after Sun Pharma and Glenmark's June quarter earnings.
Most beaten down sectors like bank, auto, FMCG and metal gained more than a percent each.
The broader markets also participated in bounce back, but the gains were limited compared to benchmarks. Nifty Midcap index was up half a percent and Smallcap index gained 0.4 percent.
Sensex was up 430.93 points or 1.17 percent to 37,389.09 and the Nifty rose 126.60 points or 1.16 percent to 11,052.50 at the time of publishing this article.
Here are five key factors that drove benchmark indices higher:
US delays tariffs
Global stocks rebounded after the US announced a delay in the implementation of tariffs on some Chinese goods.
On August 13, the United States Trade Representative announced certain products including clothing and cellphones were removed from the tariff list based on “health, safety, national security and other factors”. Other tariffs will be delayed to December 15 from September 1 for certain goods, it said.
Another reason for delaying tariff is that it could impact US holiday sales.
The report also suggested that trade discussions between the US and China are likely to resume again.
Inflation data opens room for more rate cut
India's retail inflation rate in July eased marginally to 3.15 percent, remaining comfortably within Reserve Bank of India's (RBI) target level of 4 percent.
Despite the decline in overall CPI, the core CPI increased to 4.28 percent in July, from the revised number of 4.14 percent in June due to a rise in gold prices. SBI believes this is a temporary phenomenon and core inflation will ease going forward and converge towards headline CPI.
The inflation data indicated that there could be more rate cuts in October policy meet, experts feel.
The RBI has already cut the repo rate by 35 bps to 5.40 percent in its third meet this fiscal. We believe that RBI may not pause the rate cut cycle as of now, but the magnitude of rate cuts would depend on the GDP numbers.
Rupee recovers
The Indian rupee rebounded from the six-month low and appreciated 55 paise to 70.85 against the US dollar intraday amid positive trend in equity market after US delayed tariffs on some Chinese goods, easing crude oil prices and encouraging macro data.
On August 13, the rupee had plunged 62 paise to close at a nearly six-month low of 71.40 against the US dollar in line with battered equities as global market turmoil and Argentine currency crash drove investors to safe havens.
At the interbank foreign exchange, the rupee traded at 71.07 a dollar, up 32 paise from the previous closing.
Easing CSR rule and likely relief to foreign investors
The easing of new Corporate Social Responsibility rule also lifted market sentiment today.
The government will not operationalise the new corporate social responsibility provisions in the recently amended Companies Act that make violations punishable by jail, following intense lobbying by a panicked India Inc., as per a report by The Economic Times.
This comes after recommendations of making expenditure on CSR tax-deductible as well as treating non-compliance with CSR requirements a civil offence under the companies law.
Under the Companies Act, 2013, certain classes of profitable entities are required to spend at least two percent of their three-year annual average net profit towards Corporate Social Responsibility (CSR) in a particular financial year.
In addition, a media report also indicated that there could some relief from the surcharge on super-rich in coming days.
The finance ministry may soon consult the law ministry on how best to provide relief to foreign portfolio investors (FPIs) from the super-rich surcharge that was announced in the budget.
Technical view
Nifty managed to hold crucial 10,782 level and also rebounded sharply above psychological 11,000 mark, indicating the bounceback rally after a 184 points loss seen in the previous session.
Another reason for today's rally could be short covering in most beaten-down stocks. In previous session, 77 stocks among F&O segment saw a short build-up and 76 stocks saw long unwinding.
For time being upsides shall remain capped around 11,182 and unless Nifty closes above 11,146, strength should not be expected.
On the downside, 10,782 remains critical as a breach of this support shall drag down the indices into the crucial support zone of 10,576–10,512 on long term charts.
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