The Indian stock market staged a strong recovery on Thursday, August 20, with benchmark indices snapping their recent losing run as improved global sentiment, softer US bond yields and short-covering encouraged investors to return to equities. Indian benchmarks closed higher with the Nifty settling around the 24,200 level as broad-based buying lifted sentiment across sectors. Among the top performers on the Nifty were Eternal, Kotak Mahindra Bank, Bajaj Finance, UltraTech Cement and Shriram Finance. On the other hand, Hindalco Industries, Apollo Hospitals, Tata Consumer, InterGlobe Aviation and Nestle featured among the key laggards.
The positive momentum extended across all sectoral indices. The Nifty Media index emerged as the best performer, gaining 2 per cent, while the Realty index advanced 1.6 per cent. Auto, IT, private banking and infrastructure stocks also ended higher, with gains ranging between 0.4 per cent and 0.8 per cent.
The broader market also maintained its upward momentum. The Nifty Midcap index rose 0.4 per cent, while the Nifty Smallcap index gained 0.7 per cent, indicating continued buying interest beyond the large-cap segment.
Falling US Bond Yields Lift Risk Appetite
One of the major factors supporting equities was a decline in US Treasury yields. The US Treasury announced plans to double the size of its buybacks for longer-duration debt, in a move aimed at addressing the sharp increase in yields witnessed earlier this week.
The benchmark US 10-year Treasury yield eased to 4.637 per cent, while the 30-year yield slipped to 5.181 per cent. The yield on the two-year note also declined to 4.162 per cent.
Lower bond yields can improve the appeal of riskier assets such as equities, helping support investor sentiment across global markets.
Rupee Gains Against US Dollar
The Indian rupee also provided some relief to domestic investors. The currency strengthened 17 paise to 95.56 against the US dollar in early trading after the greenback weakened to a three-month low following the US Treasury’s buyback announcement.
However, elevated crude oil prices remain a potential hurdle for the currency. Oil was trading above $92 a barrel, which could restrict further gains for the rupee.
Short-Covering Adds Fuel After Extended Sell-Off
The domestic market’s rebound also followed an unusually long period of weakness. The Nifty had declined more than 2 per cent across seven consecutive sessions, its longest losing stretch in 11 months.
With benchmark indices entering oversold territory, traders appear to have used the sharp decline as an opportunity to cover short positions, adding momentum to Thursday’s recovery. The Sensex, meanwhile, ended its four-session losing streak.
FII Buying Supports Dalal Street
Foreign institutional investors also remained buyers in the domestic market. Provisional NSE data showed that foreign investors purchased equities worth Rs 408 crore on Wednesday.
This followed net purchases of Rs 2,573 crore in the previous session, indicating continued buying interest even as the benchmark indices remained under pressure.
Sectorally, Nifty IT and Nifty Financial Services excluding banks gained more than 1 per cent each and led the advance. Nifty Oil & Gas was among the few sectors trading lower.
Market breadth also improved substantially, with 1,965 stocks advancing against 518 declines on the NSE, while 110 stocks were unchanged.
Global Markets Turn Supportive
Positive cues from international markets added to the domestic recovery. South Korea’s Kospi surged more than 6 per cent, while Japan’s Nikkei and Hong Kong’s Hang Seng gained over 1 per cent each.
On Wall Street, the Nasdaq finished the previous session around 0.16 per cent higher, helping maintain a supportive backdrop for Asian equities.