NEW DELHI: Joining the global equity rally on the back of softer-than-expected US inflation data, Sensex ended 742 points on Wednesday to cross the 65,600 mark, while Nifty ended 232 points stronger well above its hurdle at 19,650.
Led by strong participation from retail investors, the rally in smaller stocks showed no signs of slowing down as the Nifty Smallcap50 outperformed with a 1.6% jump.
The post-Diwali rally made investors richer by about Rs 3.3 lakh crore as the total market capitalisation of all BSE-listed stocks jumped to Rs 325.41 lakh crore.
Nifty bulls are betting that the momentum in the largecaps will be back soon to take the index beyond 20,000.
"Today is a perfect occasion to catch the bears on the wrong side. I would say that this is just the start. I told you 19,700 is coming within a few days of Diwali. Now you write it down, 20,000 is here by the end of this month," said Sanjiv Bhasin of IIFL Securities.
Here are 6 factors behind the post-Diwali rally on Dalal Street:
1) US inflation data
A softer-than-expected October US inflation data (3.2%) has once again raised hopes that the US Federal Reserve could be towards the end of its rate hike cycle. "More importantly, the mere 0.2% MoM increase in core inflation is hugely positive. The takeaway from these numbers is that the Fed is done with rate hikes and the timeline for rate cuts in 2024 is likely to be advanced," said Dr V K Vijayakumar of Geojit Financial Services.
2) Global markets
US inflation has sparked a global rally in riskier assets. The S&P 500 (up 1.91%) and Nasdaq (2.37%) posted their biggest daily percentage gains since April 27.
Asian markets were also trading with a positive bias today with Japan's Nikkei 225 up 2.5% and Hong Kong's Hang Seng rallying over 3.7%.
3) Fall in bond yields
With the probability of a rate cut by the US Fed in March rising to 31%, the 10-year US bond yield dropped nearly 20 basis points on Tuesday and was at 4.42%, its lowest level since September 22.
4) FII vs DII
While FIIs have been sellers of Indian stocks since September, the intensity of selling has reduced significantly in November. Market insiders are now expecting dollar money inflow as the sustained performance of the Indian market might be sparking a FOMO overseas.
On the other hand, non-stop buying by DIIs has been supporting the indices from a downfall.
5) IT stocks
Today's rally was largely led by the outperformance of IT stocks. Led by a 4-5% upside in Tech Mahindra, Coforge and Mphasis, Nifty IT jumped about 2.6%. Heavyweights Infosys and TCS rallied around 2-3% each.
6) Technical factors
Monday's session saw the Nifty closing above its VWAP for the first time in the last five days. "This encourages us to be more confident about the 19,840 trajectory which we have been playing since last week. In anticipation of the same, we had pushed the downside marker higher to 19433/19370 as well, which may remain the turnaround points until 19,840 is cleared," said Anand James, Chief Market Strategist at Geojit Financial Services.
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