Mumbai: Strong economic fundamentals, value buying and attractive valuations boosted investor confidence in the Indian equity markets on Tuesday leading a barometer index to close with gains of 291 points a day after the key Mumbai index shed some 1,625 points -- or nearly 6 percent.
The Indian rupee also gained strength. It touched an intra-day high of 65.87 and closed with a gain of 56 paise at 66.08 to a US dollar from its Monday's close of 66.64.
Investor confidence seemed to be returning a day after the mayhem in global financial markets and a crash in China which spooked the key Mumbai index into shedding some 1,625 points, or nearly 6 percent.
The barometer 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 25,916.26 points, closed at 26,032.38 points -- up 290.82 points or 1.13 percent from its previous close at 25,741.56 points.
The Sensex touched a high of 26,124.83 points and a low of 25,298.42 points during intra-day trade.
A similar trend played out at the the National Stock Exchange (NSE), where the broader 50-share CNX Nifty closed higher at 7,880.70 points, with a gain of 72 points, or 0.92 percent.
Analysts said Monday's massive correction has made valuations attractive for not only foreign but domestic investors too.
"The market is riding on a wave of value buying on lower levels. The valuations have become very attractive and coupled with the statements that have come in from the government have helped the investors gain confidence," Anand James, co-head, technical research, Geojit BNP Paribas, told IANS.
There is also a sense that the strong economic fundamentals have the potential to hasten the recovery in Indian equity markets in comparison to other larger economies.
"The Indian economy's fundamentals are very strong, be it growth, be it lower current account deficit, slowdown in inflation, pickup in consumer sentiment and hopes of a rate cut. These factors will hasten recovery in India faster than other markets," Devendra Nevgi, chief executive of ZyFin Advisors elaborated to IANS.
Other analysts pointed out to the lull in the global commodity prices, especially crude oil which has fallen to a six-year low, as a major positive for the Indian economy and the markets.
"Lower commodity prices and strong fundamentals plus a push towards infrastructure creation will propel the economy. This will certainly catch the attention of the global capital markets once the turmoil has subsided," Vaibhav Agarwal, vice president and research head at Angel Broking told IANS.
Industry body Federation of Indian Chambers of Commerce and Industry (Ficci) explained that Monday's fall was a transient phenomenon that should get addressed in due course.
"Both the government and the Reserve Bank of India (RBI) are keeping a close watch on the situation and we expect that this development would spur us into accelerating the reforms process and making Indian economy even more robust and resilient from within," said Ficci secretary general A. Didar Singh.
Gazing ahead, an unexpected move by the People's Bank of China (PBOC) to go in for an inter-policy rate cut on Tuesday will be a positive support to the Indian markets on Wednesday.
The announcement came in after market hours here.
Sector-wise, healthy buying was observed in banking, automobile, oil and gas, metal and healthcare stocks.
However, only information technology (IT) scrip came under selling pressure.
The S&P BSE banking index zoomed by 484.36 points, the automobile index augmented by 359.50 points, the oil and gas index gained by 309.66 points, the metal index rose by 277.30 points and the healthcare index gained by 197.89 points.
On the other hand, the S&P BSE IT index declined by 52.68 points.
Major Sensex gainers in Tuesday's trade were: Vedanta, up 7.73 percent at Rs.86.45; Tata Motors, up 6.30 percent at Rs.329.20; Coal India, up 5.23 percent at Rs.353.90; ICICI Bank, up 5.06 percent at Rs.283.50; and Axis Bank, up 4.18 percent at Rs.502.40.
The major Sensex losers were: HDFC, down 1.82 percent at Rs.1,145.60; Maruti Suzuki, down 1.20 percent at Rs.4,199.45; Infosys, down 0.56 percent at Rs.1,086.50; Larsen and Toubro (L&T), down 0.48 percent at Rs.1,625.60; and Tata Consultancy Services (TCS), down 0.46 percent at Rs.2,567.35.
Among the Asian markets, Japan's Nikkei fell by 3.96 percent and China's Shanghai Composite Index lost 7.63 percent, However, Hong Kong's Hang Seng gained 0.72 percent.
In Europe, London's FTSE 100 index rose by 2.72 percent, French CAC 40 gained by 4.30 percent and Germany's DAX Index was higher by 4.14 percent at close of trading here.