The sharp rally was a tad surprising coming just a day after the sharp correction on the F&O expiry the previous day. In fact, on 27 December, Indian shares closed 1% higher and were largely led by state-run banks. Some strength in Asian markets and the signs of an early trade deal also kept the markets buoyant. On 27 December, Friday, the Nifty closed at 12,246, while the P BSE Sensex closed at 41,598. With this rally on Friday, the full rally on the indices is more than 13% now.

Apart from the trade deal between China and the US, another key domestic trigger was the Operation Twist announced by the RBI. Under this operation, the RBI will simultaneously purchase long duration bonds and sell short duration bonds. This is not only useful to narrow the spreads but also benefits the PSU banks as their bond portfolios show appreciation due to fall in yields. This also helped markets higher on Friday.

While Axis Bank was the top gainer on the Sensex, other private banks as well as RIL reacted positively. These heavyweights helped the Sensex to stay buoyant. The FIIs have also been buyers in December and have infused more than Rs.100,000 crore into Indian equities since Jan 2019. That has kept stock markets buoyant.