IT companies led the gains among Sensex constituents.
Stock market rally today: Indian equity benchmark indices, BSE Sensex and Nifty50, rallied strongly in trade on Tuesday, rising more than 1% in afternoon trade. Comments by Finance Minister Nirmala Sitharaman on long-term capital gains (LTCG) tax and securities transaction tax, along with a rally in IT stocks and other factors, lifted investor sentiment.BSE Sensex ended the day at 73,033.78, up 1,109 points or 1.54%. Nifty50 closed at 22,721.95, up 359 points or 1.60%.The rally added more than Rs 4.12 lakh crore to the combined market capitalisation of listed companies, taking the total to Rs 470 lakh crore.IT companies led the gains among Sensex constituents. HCL Tech shares climbed more than 5% following the company's second-quarter results, while TCS, another heavyweight in the sector, advanced around 5%.
Tech Mahindra and Infosys also rose by approximately 3% each.
Why did stock market rally today?
LTCG, STT in focusFM Nirmala Sitharaman said on Tuesday that discussions have been underway in domestic and international forums on long-term capital gains (LTCG) tax and securities transaction tax (STT). Speaking at the Bloomberg New Economy Forum, she noted that both Indian and international investors had been sharing their views on LTCG tax. She added that the debate over transaction tax and whether different asset classes should be taxed in a similar manner had been discussed extensively.
Though she refrained from committing to any changes.“We are very close to the budget and the preparation for the budget has started, and it may not be the best time for me to say what I will or what I will not consider,” she said.Her remarks come as India's equity market continues to face substantial outflows amid several challenges. In its Ecowrap report on Monday, SBI Research said the government should consider scrapping LTCG tax on equities, arguing that the move could encourage investors to hold their investments for longer.IT stocks rallyHeavyweight IT stocks surged, helping lift the broader market despite the prevailing headwinds. The decline in global AI-linked stocks has also improved sentiment towards India's prominent technology companies, which have increasingly been viewed as an ‘anti-AI’ trade.South Korea's Kospi, considered a key reflection of the artificial intelligence investment boom, plunged more than 6%, while Japan's Nikkei fell over 2%.
Major technology stocks, including Samsung, also suffered steep losses as concerns grew over excessive optimism surrounding the emerging technology. Analysts have warned that the AI rally could be developing into a bubble.Rupee posts sharp gainsThe rupee strengthened by 82 paise to 94.96 against the US dollar in early trade on Tuesday, extending its recovery following measures announced by the Reserve Bank of India (RBI) to support the weakening currency.On Monday, the RBI tightened regulations governing rupee non-deliverable derivative contracts, restricting overseas clients to using these instruments only for hedging. It also extended a 20% cash reserve requirement to banks' own rupee currency hedges.These steps followed four measures announced by the central bank on Saturday. They included a dedicated dollar supply window for three state-run oil companies, tighter curbs on foreign exchange derivatives, a 20% cash reserve requirement for certain currency contracts and stricter daily cash reserve requirements for banks.“These steps are expected to reduce pressure on the spot market and curb speculative dollar buying, supporting the currency in the near term. However, sustained recovery will depend on FII flows, crude oil prices and broader dollar movement,” said Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities.Bond yields ease from multi-year highsAfter climbing to multi-year peaks, bond yields edged lower, providing some relief to equity markets.
The yield on the US 10-year Treasury slipped below 5.2%, while the 30-year Treasury yield declined to 5.56%.The yield on two-year US Treasury bonds, which tends to track expectations around Federal Reserve interest rate decisions, also eased below 4.8%.Rising bond yields have recently weighed on stock markets because higher returns from debt instruments can make them more attractive to investors, diverting funds away from equities, particularly in emerging markets.
Bond prices and yields move in opposite directions, meaning a sharp rise in yields indicates a selloff in the bond market.ALSO READ: Will Budget bring LTCG, STT relief? Here’s what FM Nirmala Sitharaman saidOil prices declineCrude oil prices fell on Tuesday as investors weighed the possibility of additional Russian oil supplies reaching global markets. US President Donald Trump defended his administration's decision to temporarily relax restrictions on Russian diesel supplies.Brent crude futures dropped more than 1%, trading near $105 per barrel, while US West Texas Intermediate (WTI) crude futures also declined by over 1% to below $93 per barrel.(Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)