Equity markets witnessed a volatile trading session on Tuesday with the benchmark Sensex shedding more than 500 points during the first hour, only to recover bulk of the losses as the day progressed and finally end the day with gains.
While shrugging off the negative sentiment created on Monday due to the abrupt resignation of Urjit Patel as Reserve Bank of India (RBI) governor, the stock market also appeared to have dismissed concerns over the State poll results that saw Congress taking the lead in BJP-ruled States like Rajasthan and Chhattisgarh.
The 30-share Sensex, which touched an intra-day low of 34,426.29 during the morning session, ended the day at 35,150.01, up 190.29 points, or 0.54%.
The market breadth was also strong with more than 1,600 stocks gaining ground, as against 811 declines.
Incidentally, the impact of Dr. Patel s exit was clearly visible in the first hour of the trading session, with banking and financial majors like HDFC Bank, HDFC, ICICI Bank, IndusInd Bank and Kotak Mahindra Bank leading the fall, in the Sensex pack.
Meanwhile, the broader Nifty gained 60.70 points to close at 10,549.15.
Subdued sentiment due to RBI Governor Urjit Patel s resignation and overhang of State election results prevailed at market opening even though U.S. markets staged a smart recovery from intra-day lows, said Viral Berawala, chief investment officer, Essel Mutual Fund.
The negative trend was short-lived as markets had already discounted the State election results yesterday and short covering was witnessed during the day leading to markets turning positive, Mr. Berawala added.
Rupee rebounds
The rupee, which opened about 1.5% lower against the dollar, was able to cut some losses during the day as it ended 0.74% lower as compared to its previous close. After opening at 72.44 a dollar as compared to Monday s close of 71.32, the rupee ended the day at 71.85 a dollar.
According to dealers, Dr. Patel s exit surprised the currency market in the early trade, but rebound in stock market, along with dollar selling by some State-run banks, eased the pressure.
The rupee, which had depreciated 15% between January and October this year, changed its trajectory in November as crude oil prices softened. This month, the currency is again under pressure on account of widening current account deficit and an up tick in crude oil prices.
Capital flows were not sufficient to fund CAD, resulting in a drawdown of $1.9 billion from India s foreign exchange reserves in 2QFY19, as against a drawdown of $11.3 billion in 1Q, Motilal Oswal Securities said in a report.