Three reasons why Sensex surged 457 points on Dec 8

No stock on BSE Sensex ended in red while only 3 stocks in the broader Nifty50 index settled the day negative

Benchmark indices settled the day over 1.5% higher led by gains in Tata Steel, Tata Motors, Adani Ports and ITC. The sentiment was supported by strong global cues ahead of ECB policy review later today.

BSE Sensex rose as much as 485 points in intra-day trade while Nifty 50 touched its crucial 8,250 level. The gains today overcame declines in the previous sessions after RBI unexpectedly kept repo rates unchanged.

S&P BSE Sensex ended the day up 457 points at 26,694 and the Nifty50 settled 145 points higher at 8,247.  In broader markets, BSE Midcap rose 1.49% while Smallcap gained 1.28%%.

"We feel that today's sharp positive reaction is unlikely to sustain in the near-term. Today's strong bounce back is due to the underperformance of India compared to the rest of the world in the recent times and short covering post yesterday’s negative RBI action. Global market continues to outperform assuming that the FED rate hike is already discounted. A positive stance on CRR and outcome of ECB meet today with an extension in stimulus measures is providing a support to the market," said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services.

No stock on BSE Sensex ended in red, while only 3 stocks in the broader Nifty50 index settled the day negative.

BSE Bankex rose almost 1.5% after the RBI reversed an order that forced banks to deposit all their extra cash with it in a bid to absorb excess liquidity. Kotak Mahindra Bank, Indusind Bank, Yes Bank, GDFC Bank and SBI led the gains in the index, up between 1.5-2.5%.

Meanwhile, rupee has also rallied to nearly 1-month high after RBI decision yesterday. It hit a record low last month amid outflows from Indian capital markets.

Below are three reasons that lifted the benchmark indices in today's trade:

ECB decision

Investors today factored in extension of quantitative easing (QE) by European Central Bank (ECB) for about six months ahead of its monetary policy review later today.

The extension is aimed to boost stubbornly weak price growth, but with much of its firepower exhausted it may also debate sending a token signal about the eventual end of such purchases.

A decision by the ECB to not extend its stimulus program of buying 80 billion euros ($86 billion) in bonds a month past the current March deadline could add to concerns over Italy.

European shares climbed to a three-month high on Thursday, mirroring gains on Wall Street and in Asia. Meanwhile, Euro was hovering near its three-week high while gold remains firm on a weaker dollar.

Global markets gain momentum

Asian shares hustled to one-month highs on Thursday after Wall Street strode to another record Dow Jones hit record intraday highs in overnight trade in the US markets, helped by gains in bank stocks.

Risk appetite got an extra boost when China reported upbeat trade figures with exports and imports both beating forecasts. Resource imports were very strong, a major reason prices for bulk commodities have been going gangbusters.

Nikkei share average closed at the highest level since last December on Thursday after Japan’s economy grew 1.3 percent in annual terms in the July-September quarter. Economists said the central bank is likely to keep its current lavish monetary easing intact for now, without pushing interest rates further into negative territory, because of the economy’s sustained expansion. The Nikkei ended 1.5% higher at 18,765.47, the highest level since December 2015.

Metal and auto stocks lead rally

Metal sector index was the top sectoral gainer on BSE Sensex after settling almost 3% in today’s session. Tata Steel ended the day over 4.9% up, making it the top gainer on BSE Sensex after the company made a 10-year commitment to a one-billion-pound investment plan as part of its crucial talks with steelworkers’ unions to save thousands of jobs in the UK.

Vedanta hit a 52-week high of Rs 244.5 at intra-day, up 5.46% on the BSE, while NMDC, SAIL, JSPL and Hindalco were the other gainers.

“For Dec’16, we expect base metal prices to trade higher as the Organization of Petroleum Exporting Countries finalized a deal to cut production by 1.2 million barrels a day starting in January 2017, its first reduction since 2008," Angel Broking said base metals monthly report.

The BSE Auto index settled 2.72% higher at its highest level in more than two  months. Tata Motors gained 3.65% after solid JLR sales growth in China and North America in November. Other gainers included Motherson Sumi, Bharat Forge, MRF, Hero Moto, Bajaj Auto and Maruti Suzuki, up between 2-6%.

Photograph: Reuters