Mumbai: India’s stock gauges climbed nearly 1.8% Monday, with the Sensex surging 1,240 points, propelled by short covering in the recently hammered HDFC Bank and robust buying in the shares of Reliance Industries, which has now surpassed global energy rivals PetroChina and Shell Plc in market capitalisation after hitting an all-time high.

Buoyant global market conditions further contributed to the rally on D-Street, with the odds shortening on an early resumption to the rate easing cycle by the US Federal Reserve.

The BSE Sensex gained 1.76% to close at 71,941.57. The Nifty advanced 1.76%, or 385 points, to close at 21,737.60. Both indices have fallen by half a percentage point over the past four weeks, led primarily by a precipitate decline in the stock of HDFC Bank, which has the highest individual weighting on the Nifty.

Fear Gauge at 10-Month High
The Volatility Index – a measure of traders’ concerns over relative valuations – rose 13.09% to a 10-month high, indicating the persistence of elevated near-term volatility.

Analysts said the expected volatility on account of the upcoming Budget and the upmove in the indices could have propelled traders to cover short positions, leading to a rally in the markets.

“Call writers covered short positions, and the supply zone area of 21,600 was crossed by the market, leading to short covering,” said Rajesh Palviya, senior vice president of research-technical and derivatives, Axis Securities.

Palviya said that since it was a fresh day for the February expiry, the existing short positions were squared off.

“Foreign funds rolled over short positions, which are short-heavy at 108,000 net short contracts. That spurred short covering action, also supporting the rally,” said Ruchit Jain, lead research analyst, 5paisa.

Overseas funds net bought shares worth Rs 110 crore on Monday, while their domestic counterparts were buyers to the tune of Rs 3,221 crore.

The Reliance Powerlift
Analysts said that Nifty clambered to a 10-day closing high with a surprising 400-point gain after a gap-up opening. There was a significant contribution to the index from Reliance, India’s most-valuable company.

“Reliance has close to 10% weighting on Nifty, and that climbing more than 6% contributed in a big way to the index gains – with a 165-point contribution seen solely by Reliance at close,” said Sagar Doshi, senior vice president-research, Nuvama Professional Clients Group.

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