Indian stock markets staged a strong recovery on Friday, October 9, as information technology shares attracted buying and investors picked up stocks following the previous session's sharp sell-off. The rebound came despite continued concerns about high crude oil prices, foreign investor outflows and the Reserve Bank of India's tighter monetary policy stance.
The BSE Sensex climbed 879.09 points, or 1.23%, to close at 72,472.33. Meanwhile, the Nifty 50 gained 288.65 points, or 1.30%, ending the session at 22,520.45.
The gains followed Thursday's steep decline, when the Sensex dropped 1,045.46 points, or 1.44%, and the Nifty lost 371.25 points, or 1.64%. On Friday, investors bought shares at lower prices, while IT stocks rallied despite concerns about the US government's decision to suspend several technology companies from its green-card programme.
The recovery also brought an end to the benchmark indices' extended losing streak. However, uncertainty remains over whether the gains can be sustained amid continuing domestic and international challenges.
IT STOCKS LEAD THE MARKET RECOVERY
Information technology shares were among the leading contributors to Friday's market gains. The Nifty IT index advanced 3.02%, ranking it among the best-performing sectoral indices.
The rally followed a reassessment by investors of the immediate consequences of the US government's suspension of major technology companies, including TCS, Infosys, Wipro and HCLTech, from the Permanent Labour Certification (PERM) programme, an important stage in the employment-based green-card process.
On Friday, TCS said its applications under the programme had remained in single digits over the previous two years. The company added that it did not expect the suspension to affect its workforce plans or customer engagements. It also reaffirmed its intention to recruit another 15,000 employees in the US over the next five years.
The clarification helped ease some immediate concerns about the potential impact of the restrictions. However, the longer-term consequences will depend on how the US government's actions evolve.
TCS's September-quarter results, announced on Thursday, also boosted investor sentiment. Its annualised artificial intelligence (AI) revenue increased nearly 20% quarter-on-quarter, rising from $2.6 billion to $3.1 billion, indicating continued expansion in AI-related business.
The company reported a consolidated net profit of Rs 13,884 crore for the September quarter, an increase of approximately 15% year-on-year. Revenue grew 11.2% to Rs 73,188 crore.
However, sequential revenue growth remained modest at 0.5% in constant currency terms, indicating that customers continue to exercise caution over spending despite expanding opportunities in AI.
BARGAIN BUYING AFTER THURSDAY'S SHARP FALL
Bargain buying and short covering following Thursday's steep correction also played a significant role in Friday's rebound.
The previous session's decline pushed share prices lower, encouraging some investors to seek opportunities in companies they consider to have strong long-term potential. This strategy, commonly known as bargain buying or buying the dip, involves purchasing stocks after a price decline.
Sharp short-term falls can attract investors looking to accumulate shares at lower valuations, helping support market prices. Traders who had anticipated further declines may also purchase shares to close their positions, a process known as short covering, adding to the upward momentum.
The broader market also participated in the 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 increased 0.54%.
The India VIX, which gauges expected market volatility, declined 6% to 14.36, suggesting that near-term investor anxiety had eased.
Nevertheless, bargain buying alone does not establish that the market has reached its bottom. The recovery could come under renewed pressure if crude oil prices increase, foreign investors continue selling or global bond yields remain high.
MOST SECTORAL INDICES END IN THE GREEN
Friday's recovery extended across most sectors, with the majority of sectoral indices closing higher.
The Nifty FMCG index advanced 2.20%, while the Nifty IT rose 3.02%. The Nifty PSU Bank gained 1.63%, the Nifty Auto climbed 1.42%, and the Nifty Financial Services 25/50 increased 1.36%.
The Nifty Private Bank rose 1.32%, while the Nifty Metal and Nifty Media indices advanced 1.10% and 1.23%, respectively. The Nifty Realty gained 0.92%, and the Nifty Pharma rose 0.54%.
The Nifty MidSmall IT and Telecom index climbed 2.56%, while the Nifty MidSmall Financial Services advanced 1.44%. Healthcare, consumer durables and chemicals stocks also finished in positive territory.
The Nifty Oil and Gas index was a notable exception, edging down 0.09%.
CRUDE OIL AND FII SELLING REMAIN KEY RISKS
Despite the recovery, elevated crude oil prices and continued selling by foreign institutional investors (FIIs) remain significant concerns for 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 market data available during the session. The decline in oil prices provided some relief, although Brent crude continued to trade above $100 per barrel.
Expensive crude oil can raise India's import bill, put pressure on the rupee and increase inflationary risks. These developments could also affect interest-rate expectations and corporate earnings.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said domestic equities experienced a relief rally, supported by value buying and short covering after the recent correction. He noted that IT shares outperformed following a strong beginning to the second-quarter earnings season and growing confidence in AI-led revenue opportunities.
However, Vijayakumar cautioned that persistent FII outflows and elevated global bond yields continued to limit the prospects for a sustained recovery.
He said investors would look to the domestic consumer price index (CPI) inflation figures scheduled for release on Monday for further indications about the interest-rate outlook, following the RBI's shift towards calibrated tightening.
The RBI increased the repo rate by 25 basis points to 5.50% and changed its policy stance from neutral to calibrated tightening. The move heightened concerns about borrowing costs and market valuations, contributing to the pressure following the Monetary Policy Committee meeting.
Vijayakumar added that companies' actual September-quarter performance, which is expected to reflect year-on-year growth, would be crucial in determining whether the market's recovery could continue.
RUPEE ENDS NEAR RECORD LOW
The rupee closed largely unchanged at 96.73 against the US dollar on Friday, although it recorded a decline over the week.
The currency remained close to its all-time low of 96.96 per dollar, recorded in May, despite the RBI's recent rate increase. Unfavourable hedging activity and investment flows continued to weigh on the rupee.
A weakening currency, high crude oil prices and sustained foreign fund outflows remain major concerns for Indian equities. Although Friday's gains provided some relief after the sharp correction, investors will continue monitoring these factors alongside corporate earnings and inflation figures.
For now, the rebound reflects renewed buying at lower price levels and optimism about IT earnings, particularly growth in AI-related business. The sustainability of the rally will depend on corporate earnings, foreign investor flows, crude oil prices and global bond yields.
