Sensex rises as tribunal allows take over of IL&FS

The benchmark equity indices snapped three days of losses, after the government sought approval from a court — which was granted after market hours on Monday — to take control of indebted lender IL&FS that has roiled markets after it defaulted.

A rally in global equities on news of a trade agreement between the US, Canada and Mexico, also helped investor sentiment.

The S&P BSE Sensex advanced 299 points, or 0.8 per cent to 36,526.14, while the Nifty 50 index rose 78 points, or 0.71 per cent to end at 11,008. The markets saw intense volatility with the Sensex swinging 656 points, or 1.8 per cent in intra-day trade. Several index components, including YES Bank and Kotak Mahindra Bank, saw their share price fluctuate more than 10 per cent during the day.

On Monday, foreign portfolio investors (FPIs) sold shares worth ~18.4 billion, while their domestic counterparts provided buying support to the tune of ~18 billion.

Market experts attributed the gains in several stocks to short covering.

"The market rebounded after a weak start with short covering in banking stocks, after the recent correction and a positive global market. The new trade deal between US and Canada ease trade war concerns and will stimulate sentiment,” said Vinod Nair, head of research, Geojit Financial Services.

The Centre told the National Company Law Tribunal (NCLT) that that it seeks to replace the management of Infrastructure Leasing & Financial Services (IL&FS), arguing that a change was needed to stop the financial collapse of the company. A gauge of financial stocks fell nearly 13 per cent last month after IL&FS defaulted on its debt.

The rout further added to the woes of investors concerned over higher oil prices and a tumbling rupee.

“It is a preliminary step along expected lines,” said Amit Mantri, founder of 2Point2 Capital. “Investors will now be more confident of the government using all means to ensure this doesn’t result in larger problems to the credit markets.”