Stock Market Rally: Why did the Nifty jump 500 points on Thursday? Key factors, contributors explained

The Nifty has witnessed its biggest single-day gain on Thursday, January 2, in the last six weeks. The last instance of the index witnessing such a move was back on November 22. The index surged over 450 points during Thursday’s trading session, crossing not only 23,800 on the upside, but also 24,000 and even 24,100.

But what led to this surge on the index after a 12-day consolidation period?

Firstly is the positioning of the foreign institutions. Net longs for FIIs fell to as low as 13.5% as of Wednesday’s closing. Foreign Institutions continue to remain net sellers in the cash market and in index futures as well. Such low positioning on the long side, increasing the scope for a short-covering bounce.

Second, Thursday was also the weekly expiry of the Nifty options contracts. Call writers were of the view that 24,000 on the index will be protected on the upside, as was evident in the writing seen on the 24,100 Call strike for today’s expiry. However, with the index convincingly crossing the 24,000 mark, they were caught off guard and covered their shorts, resulting in a bigger upmove.

Lastly, volumes continue to remain subdued as participants slowly and gradually return to the market after the new year holiday. Currently, the number of contracts traded on the Nifty is 20% higher than its 20-day average. However, that has only happened after 12:30 PM, once the upmove began. Until then, the volumes remained below the 20-Day Average line.

There has also been positive brokerage commentary coming on the Indian equities. Brokerage firm Bernstein, who cautioned on the markets all through 2024, turned constructive on Thursday and wrote about the fact that one should “selectively start buying Indian stocks”. You can read more on that here.

With this move, the Nifty has now crossed both its 20-Day as well as its 50-Day Moving Average, which were placed at 24,190 and 24,152 levels respectively.