Markets end higher, thanks to windfall tax cut; Sensex gains over 560 pts, Nifty over 18050

A windfall tax reduction and Sensex gains help the markets close on a high note.

Following the Center's decision to decrease the windfall tax on crude oil, refiners, particularly powerhouse Reliance Industries, experienced a significant uptick, helping the Sensex and Nifty 50 gain 1% apiece on Tuesday. After five erratic sessions, the markets saw their largest one-day advances. The volatility index in India decreased by around 3%. However, the significant outflow of foreign funds is still a cause for worry. The Indian rupee continued to depreciate against the US dollar in the meanwhile.

The Nifty 50 increased by 158.45 points or 0.89% to close at 18,053.30, while the Sensex increased by 562.75 points (0.94%) to close at 60,655.72. The Sensex and Nifty 50 both hit intraday highs during the trading session of 60,704.48 and 18,072.05 respectively. Capital goods firms outperformed other sectors indexes, but FMCG, industrial, utilities, power, real estate, and oil & gas stocks all made significant positive contributions.

After a two-week hiatus, the Indian government reduced the windfall tax on locally produced crude oil on Monday from 2,100 per tonne to 1,900 per tonne. The Center has also decreased the extra excise tax on the export of aviation turbine fuel (ATF) from 4.5 to 3.5 cents per litre and the export duty on diesel from 6.5 to 5 cents per litre, inclusive of cess.

BSE Oil & Gas increased by 175.58 points or 0.85% to end at 20,767.92 on Tuesday. Heavyweight RIL came in second with a gain of almost 1.4%, while Adani Total Gas was the top gainer with a potential upside of about 4%. Green also included ONGC, Petronet LNG, GAIL, and Indraprastha Gas. L&T, HUL, HDFC, HCL Tech, HDFC Bank, RIL, TCS, Power Grid, Ultratech Cement, Tech Mahindra, NTPC, and Maruti Suzuki were generally the top gainers on the BSE Sensex, with gains ranging from 1-3.5%.

SBI, Bajaj Finserv, IndusInd Bank, Wipro, Tata Steel, and Bajaj Finance were among the top bearish stocks, on the other hand.

The domestic market is seeking to improve on its bad YTD performance, which was brought on by anticipation of a weak Q3 result and the union budget, according to Vinod Nair, Head of Research at Geojit Financial Services. We had a rocky start to the third quarter results, but the most recent round of financial updates from major players in the banking and IT industries is encouraging. Additionally, heavy objects are pushing the counter.

Heavy hitters are also fighting back against the argument, notably the fact that the windfall tax has decreased. Ajit Mishra, vice president of technical research at Religare Broking, adding that while some players traded mixed, the comeback in the main oil and FMCG companies kept them active. The wider indexes finished practically unchanged while maintaining the sombre mood.

The persistent outflow of foreign funds, however, would be the main mood-killer at the moment.For the eleventh day running, FIIs have sold more than they have bought in January. Since December 23, they have been consistently withdrawing money from Indian stocks.In the period from January 1 to January 16, FIIs sold 18,169.67 crore worth of Indian equities.

In the interbank foreign exchange market, the rupee fell from its previous day's print of 81.6125 per dollar to conclude the day at 81.76 versus the US dollar. Due to weak Asian peers, declining upward momentum, and purchasing in the dollar, the local currency was under pressure. The rupee appreciated 1.7% versus the dollar last week.

According to Nair, the trend should continue in the near future given the encouraging undercurrents. The second line of the Q3 data, the fate of the budget, and the Fed policy announcement will all be important factors, though.According to Rupak De, senior technical analyst at LKP Securities, the benchmark Nifty 50 has delivered a falling wedge breakthrough on the daily chart, indicating an increase in confidence.

According to Rupak De, senior technical analyst at LKP Securities, the benchmark Nifty 50 has delivered a falling wedge breakthrough on the daily chart, indicating an increase in confidence. A falling trendline breakthrough has been signalled by the RSI momentum indicator. The Nifty may go into the 18250–18270 range based on the present technical situation, which points to near-term strength. At the bottom, support can be seen at 17850.

"The bulls are striving hard to contain the damage within the current consolidation period and are awaiting some trigger for further recovery," the Religare expert continued. We believe that purchasing in a few key indexes may bring about a little reprieve in the near future, but not enough to start the next directional rise. We thus repeat our recommendation to concentrate on stock selection and risk management up until  We notice a clear indication.