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A tremendous rise was seen in the Indian stock markets on Wednesday, January 28. In early trade, Sensex rose by more than 650 points, while Nifty crossed 25,300. This is the second consecutive day when the market is trading in positive territory. Although the market went down later, it is still trading in the green.

The free trade deal with the European Union and positive signals from global markets boosted investor confidence. The biggest rise was seen in oil and gas, capital goods, banking, power and commodity stocks. At around 10 am, BSE Sensex was trading at 82,503.97, up 646.49 points. Nifty rose 196.70 points to 25,372.10.

There were three main reasons for today’s rise in the stock market:

1. Trade deal between India and European Union

Investor confidence increased after the Free Trade Agreement (FTA) between India and the European Union. It is being called the “mother of all deals”. Under this agreement, taxes on approximately 99% of Indian exports to Europe will be reduced. Duty will be reduced on more than 97% of European exports to India. This deal will cover about a quarter of global GDP and create a market of about 2 billion people.

2. Strong signals from global markets

Asian markets including South Korea’s KOSPI, Shanghai’s SSE Composite and Hong Kong’s Hang Seng index were trading in positive territory on Wednesday morning. Earlier, on Tuesday night the American stock markets had also closed mostly with a rise. This also gave a boost to the Indian markets today.

3. India VIX falls

The India Volatility Index (India VIX), which reflects the level of fear among stock market investors, fell more than 2% to 14.13 on Wednesday. The fall in VIX means that market volatility has reduced and investor confidence has increased.

What next?

Anand James, Chief Market Strategist, Geojit Investments, says that a direct move above 25,180 on the Nifty index will indicate a reversal, the possible target of which could be 25,800. However, resistance is expected around 25,580. He also said that if Nifty is not able to cross the level of 25,400, then there is a need to be cautious. To change the current outlook, a move below 25,080 would be needed. However, the chances of a sharp decline during trading hours are less.