Bailout of global lenders brings relief to market, benchmarks gain

Benchmark indices gained for a second consecutive day after concerns around the global banking crisis eased as Credit Suisse secured emergency liquidity. The Sensex and the Nifty50 added over 0.6 per cent, each, to trim their weekly losses to below 2 per cent.

After adding 434 points in two days, the Sensex finished at 57,990 while the Nifty50 reclaimed 17,000-mark to close at 17,100. Among sectors, metal and banking stocks staged a comeback to cap a tumultuous week, underlined by the collapse of Silicon Valley Bank and fears of default risk at Credit Suisse.

During the week, domestic banks felt the impact of the global sell-off in banking stocks, with the Nifty Bank index declining 2.2 per cent and the Nifty PSU Bank going down 4.5 per cent in five trading sessions.

In the last two days, banking majors rallied on the back of optimism after larger banks in the region offered a rescue package to First Republic Bank – of $30 billion in deposits. However, the optimism was short-lived as the rally in European stocks faded later.

The fall in US bond yields on expectations that the Federal Reserve will moderate its tightening path boosted sentiment.

Meanwhile, a 50-billion-franc credit line from the Swiss National Bank to Credit Suisse helped it mitigate a collapse in investor confidence. The helping hand came after a huge slump in share prices of the lender and as a relief to investors who were worried that problems in the company could trigger a crisis for financial firms in the region. However, a proposed merger with UBS Group AG was turned down by both entities.

In the coming days, markets are expected to be volatile after the European Central Bank raised rates by 50 basis points (bps) on Thursday, and the ECB president saying that inflation is projected to remain on the higher side for a longer period of time.

Investors will now be keenly tracking the Federal Reserve's monetary policy announcement next week. The US central bank is expected to raise interest rates by 25 bps.

"The rebound is largely in sync with stability on the global front. However, participants shouldn’t read much into it as Nifty50 has to cross multiple hurdles for trend reversal. We thus recommend staying selective and preferring index majors over others,' said Ajit Mishra, VP, technical Research, Religare Broking.

On Friday, the market breadth was weak with 1,993 stocks advancing and 1,519 declining on the BSE. Foreign portfolio investors (FPIs) were net sellers to the tune of Rs 1,766 crore, according to provisional data from the exchanges.

“What we are seeing is a relief rally backed by strong positive global cues as there are expectations that the Fed may not take aggressive rate hike steps to tame inflation. Some of the concerns over the falling financial health of the US banking industry have also subsided, which further boosted the market sentiment,' said Amol Athawale, technical analyst (DVP), Kotak Securities.

More than two-thirds of the Sensex stocks gained on Friday. HDFC Bank was up 1.4 per cent and contributed the most to the 30-share index gains. ICICI Bank, which gained 1.6 per cent, and Infosys — 1.04 per cent — were the other stocks in the positive zone.