Sensex, Nifty end higher after highly volatile session, financials and IT gain

Stock market news: Benchmark indices, S&P BSE Sensex and NSE Nifty 50 experienced a notable upturn on Tuesday, bolstered by a resurgence in financial stocks, while favourable domestic inflation data and prospects of increased foreign investments contributed to positive market sentiment.

The NSE Nifty 50 index saw a rise of 0.59 per cent, reaching 21,743.25, while the S&P BSE Sensex settled 0.68 per cent higher at 71,555.19. Among the thirteen major sectors, eleven recorded gains, with financials emerging as the top performer, marking a 1.37 per cent increase following a 1.41 per cent decline in the previous session.

"The domestic market largely recovered from yesterday's losses, driven by gains in the banking sector. Improved sentiment stemmed from a decline in domestic inflation, which is expected to boost rural demand. Despite this, broader markets continued to underperform compared to frontline indices due to high valuations. However, investors remained cautious ahead of US inflation data, anticipating a moderation, pivotal for the Fed's interest rate trajectory," said Vinod Nair, Head of Research, Geojit Financial Services.

In January, India's retail inflation hit a three-month low, signaling stability in the macroeconomic environment. Additionally, the global index provider MSCI raised India's weightage in its Global Standard index, potentially leading to over $1.2 billion in passive foreign portfolio investor (FPI) inflows due to the index revision, according to Abhilash Pagaria, Head of Nuvama Alternative and Quantitative Research.

However, small-caps and mid-caps, which have a more domestic focus, underperformed blue-chip stocks for the third consecutive session, with small-caps rising by 0.17 per cent and mid-caps by 0.34 per cent.

Sanjiv Bhasin, Director at IIFL Securities, interpreted the recent correction in small- and mid-caps as healthy, suggesting it was necessary to clear market froth and create new entry opportunities.

Conversely, the metals sector experienced a decline, with a notable 2.07 per cent loss. Hindalco, a prominent aluminum maker, witnessed a substantial drop of 12.42 per cent after falling short of profit estimates for the December quarter due to weak aluminum sales and increased costs at its US subsidiary, Novelis.

Furthermore, digital payments platform Paytm stumbled by 10 per cent and hit a record low following a downgrade by brokerage firm Macquarie, which cited concerns over a potential exodus of customers after the recent regulatory measures imposed on Paytm's banking arm by the central bank.

Meanwhile, Asian markets recorded gains in anticipation of a crucial US inflation reading, expected later in the day, which could influence decisions regarding US interest rate adjustments.

(With Reuters inputs.)