Falling crude prices and a drop in US treasury yields stirred a market rally on Thursday with the Sensex rising 405 points — a day ahead of the monetary policy announcement by the Reserve Bank of India, which is widely expected to maintain a status quo in rates.

Fears of a global slowdown have led the markets to believe the demand for crude will fall, reversing a surge in its price that had seen Brent close to $100-per-barrel levels.

Brent prices are trading at $85.47 per barrel on Thursday against the previous close
of $85.81 as macro-economic concerns have shoved out worries of Saudi Arabia and Russia cutting off supplies of the fuel.

Besides oil prices, the markets faced headwinds in rising US treasury yields, which had climbed to 16-year highs to 4.884 per cent intra-day on Wednesday.

However, the yields have done a sharp course correction, trading at 4.72 per cent on Thursday.

Market circles said investors were also bottom-fishing in stocks across capital goods, banking and IT sectors.

Moreover, positive economic data supported the sentiment.

They pointed out that while foreign portfolio investors (FPIs) were net sellers on Thursday, selling amounts have moderated.

The 30-share BSE Sensex which opened in the green at 65598.26, built on its gains and rose 527.16 points to a day’s high of 65,753.20.

It later settled 405.53 points or 0.62 per cent higher at 65631.57. On the NSE, the broader Nifty rose 109.65 points to end at 19545.75.

Provisional data showed FPIs selling stocks
Rs 1,800 crore on Thursday, much less than Rs 3900 crore in the previous trade.

“The positive signal from the PMI data and the correction in the crude price boosted the market sentiment. Regarding monetary policy, the market expects the RBI to hold on to rates as the external demand outlook indicates muted trend,” Vinod Nair, head of research at Geojit Financial Services, said.

L&T was the top gainer rising 2.35 per cent in the Sensex stocks, followed by Titan, TCS, Maruti, Mahindra & Mahindra, Infosys, ICICI Bank and Asian Paints which gained up to 1.54 per cent.

On the other hand, Power Grid, Nestle, NTPC, HCL Technologies and Bajaj Finance fell up to 1.26 per cent.

In the broader market,
the BSE smallcap gauge climbed 0.59 per cent and the midcap index dipped 0.03 per cent.

“Recovery in global markets followed by a sharp drop in international crude oil prices and steady trend in US bond yields triggered a relief rally in domestic shares after two sessions of losses,” Shrikant Chouhan, head of research (retail), Kotak Securities Ltd, said.