Strong buying in technology stocks following HCL Technologies’ upbeat September-quarter performance powered a solid rally on Dalal Street on Tuesday. A recovery in the domestic currency, along with a pullback in crude oil prices, also aided the much-needed rebound.
The Nifty 50 climbed 1.60% to settle at 22,721, while the Sensex closed at 73,033, up 1.54% from Monday’s close.
After facing sustained selling pressure, the markets finally caught a breather as the September-quarter earnings season got underway, with early results from the technology sector providing a positive surprise. A reassessment of the global artificial intelligence (AI)-led trade, amid concerns over elevated valuations, may also have encouraged investors to return to software stocks.
Markets also received an additional boost after Finance Minister Nirmala Sitharaman indicated her willingness to hear views on the securities transaction tax (STT) levied on share trading, raising hopes of a possible reassessment of the levy.
1. IT stocks lead the rally after HCL Tech’s strong results
Tuesday’s rally was largely driven by technology stocks, with the Nifty IT index surging 5.5%. HCL Technologies led the gains, soaring 8.4%—its biggest single-day percentage rise in more than six years—as improved profitability metrics and strong quarterly results lifted sentiment.
Tata Consultancy Services (TCS), India’s largest IT services company, also jumped 6.8%.
“IT stocks led the rally after HCLTech’s quarterly performance; stronger AI-related revenue and healthy deal wins bolstered confidence in the sector’s earnings outlook. TCS, Infosys, and Tech Mahindra joined the advance, making IT the clear sectoral outperformer,” said Hariselvan Radhakrishnan, Founder and CEO of HST Wealth.
Despite Tuesday’s recovery, the Nifty IT index remains down 21.2% year-to-date, reflecting persistent concerns about AI-led disruption and its potential impact on the traditional IT services business model.
2. Rupee recovery and RBI measures ease currency concerns
The Indian rupee strengthened to 95.28 against the US dollar, extending its recovery for a second consecutive session after the Reserve Bank of India (RBI) announced additional measures to ease pressure on the domestic currency.
Over the weekend, the central bank introduced a series of measures to support the rupee, including a special window to meet the dollar requirements of state-run oil companies and a reserve requirement for certain foreign-exchange derivatives.
“The rupee’s continued recovery following recent RBI measures to manage dollar demand, along with softer crude oil prices, provided further support. A firmer currency and lower energy costs could ease pressure on India’s import bill and improve the broader macroeconomic backdrop,” said Ponmudi R, CEO of Enrich Money.
Last week, the RBI raised interest rates and signaled that it remained open to further monetary tightening, adding to the focus on currency stability and domestic financial conditions.
3. Sitharaman’s remarks on transaction tax raise hopes of a review
The market received an additional boost after Finance Minister Nirmala Sitharaman said she was keen to listen to discussions around the securities transaction tax (STT) as India seeks to attract capital inflows.
“There’s a lot of debate” over the tax, commonly known as STT, she said at the Bloomberg New Economy Forum in New Delhi. She declined to be specific, as the government prepares for the Union Budget due in February, but said it was healthy to have the debate and that she would be keen to hear the views being expressed.
Ponmudi R said the comments followed calls from market experts to remove the levy to help revive foreign capital inflows. Although the remarks did not signal an immediate policy change, they raised hopes of a possible reassessment of a tax that has remained a point of concern for market participants.
4. Crude oil prices dip below $105 a barrel
Although crude oil prices remained elevated, Brent crude, the international benchmark, fell below the $105-a-barrel mark during Tuesday’s trade as markets assessed the prospect of additional Russian energy supplies reaching global buyers.
US President Donald Trump defended his decision to temporarily ease restrictions on Russian diesel exports for six months, following a request for Moscow to release additional supplies.
However, upside risks to crude oil prices remain significant. Saudi Arabia faced fresh Houthi attacks following some of the deadliest strikes since the start of the Iran war, while attacks on cargo vessels in the Strait of Hormuz also resumed.
5. FPI selling eases
Foreign portfolio investor (FPI) selling moderated, with overseas investors offloading ₹1,708 crore worth of domestic equities on Monday. However, they remained net sellers for the 13th consecutive trading session.
According to NSDL data, FPIs had withdrawn ₹45,416 crore from Indian equities in October up to the latest reported period, surpassing the ₹35,861 crore of outflows recorded in September.
State Bank of India (SBI) Research, in its latest Ecowrap report, called for the abolition of the long-term capital gains (LTCG) tax on equities and an extension of the holding period to two to three years to attract capital inflows and improve investor sentiment.
The report highlighted the need for structural measures to strengthen capital inflows, arguing that monetary and foreign-exchange interventions by the RBI alone may not be sufficient to address the challenges facing the rupee.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
