Rally in financials, F&O expiry: Here's why Sensex rallied 996 points today

NSE's Nifty50 index ended at 9,315, up 286 points or 3 per cent.

After days of range-bound and lackluster sessions, the bulls were finally in the driver's seat on Wednesday with both the benchmark indices advancing over 3 per cent.

The S&P BSE Sensex rallied 996 points or 3.25 per cent to 31,605.22 while NSE's Nifty50 index ended at 9,315, up 286 points or 3 per cent. Volatility index, India VIX, continued to decline and it ended at 31.16, down nearly a per cent.

Here's a look at the key factors that lifted the equity market on Wednesday -

Buying in financial counters ahead of F&O expiry: Banking and financial counters witnessed huge buying interest on account of short covering. Traders recovered short positions ahead of the expiry of futures and options contracts (F&O) of May series, due tomorrow. Nifty Bank jumped a whopping 1,270 points or over 7 per cent to 18,710.55 levels with all the 12 constituents advancing. Axis Bank zoomed 15 per cent, while ICICI Bank and Bandhan Bank gained up to 9 per cent.

"Stocks such as Axis Bank and ICICI Bank have witnessed steep correction in the past month, hence there has been huge short-term trading in these stocks. However, this rally is not sustainable as the overall macro-economic conditions are not conducive due to disruptions caused by the Covid-19 pandemic," said G Chokkalingam, founder and managing director at Equinomics Research.

Auto, IT, metal stocks lend support: Apart from financial stocks, information technology (IT), and metal stocks, too, witnessed smart rally during the trade. The Nifty IT index climbed nearly 3 per cent to 13,953 levels while the Nifty Metal index surged over 2.5 per cent to 1,801.25 levels.

Metal stocks have been on an upswing as more economies have re-opened after the Covid-19 lockdown.

Indian markets to see a 'strong rebound': Sentiment was also boosted after global investment bank JP Morgan said it was forecasting a "very strong rebound" in Indian markets for the second half of the year. "India is going to be going through a very difficult first half of the year. We have GDP down in the second quarter, 35 per cent annualised pace but we have a very strong rebound in the second half of the year, but one that still doesn't get you back to where you were," said Bruce Kasman, chief economist at JP Morgan, news agency IANS reported. READ MORE

MSCI rejig: Abbot India, Ipca Laboratories, Jubilant Foodworks and Tata Consumer are among the six stocks that have been added to the MSCI India Domestic Index. Domestic equities, according to a recent report by Emkay Global, are expected to see inflows to the tune of $250 million (Rs 1,900 crore) on account of this semi-annual rebalancing of the MSCI India Index, which is tracked by funds worth $14 billion (Rs 1 trillon). The changes are expected to take place as of the close of May 29, 2020. READ MORE

Technical view: Nagaraj Shetti, Technical Research Analyst at HDFC Securities, on Tuesday, had said that a sustainable move above 9,150-9,180 was likely to lift Nifty towards 9,500 levels in the short span of time. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services, too, had said that if Nifty could manage to sustain above 9,180 levels, then it may see a bounce towards 9,300-9,350 zone.