India’s sizzling stock rally just got hotter on Friday with Sensex and Nifty breaking its previous all-time high touched on the New Year day. Sensex ended with a gain of 847 points at 72,568 points while Nifty crossed the 21,900-level led by gains in heavyweights TCS and Infosys.
The market capitalisation of all stocks listed on BSE rose by about Rs 3 lakh crore to Rs 373.4 lakh crore. In dollar terms, the Indian stock market was near the $4.5 trillion and looks poised to take over Hong Kong as the world’s fourth-largest hub of equities.
Nifty IT was the single biggest gainer as it jumped about 5% with Infosys gaining about 8% and Coforge 6%. Tech Mahindra, Wipro, TCS, Mphasis, and LTIMindtree were up about 4-5% each.
Today’s rally ignores higher-than-expected US inflation and positive job data, which tempered expectations for an imminent rate cut by the US Fed.
Here are the key factors behind the rally in Sensex and Nifty today:
The single-biggest trigger for the market rally is the strong buying interest seen in IT stocks after Infosys reported inline results and TCS surprised positively.
“We see Q3 to be the bottom for the earnings downgrade cycle for Infosys and the sector. We have stayed positive on the sector through the year, and expect the strong deal wins of the last few quarters to gradually convert into revenue in coming quarters, even as the US macro becomes favourable,” Nuvama said.
2) Global markets
While the US market ended little changed overnight on hotter-than-expected inflation, Japan’s Nikkei share average reached a fresh 34-year peak on Friday.
3) DII buying
Led by a steady inflow into mutual funds and buying by retail investors, domestic investors have been supporting the market. Thursday’s market data shows that domestic institutional investors were net buyers to the tune of more than Rs 1,600 crore.
4) Buying in PSU banks and realty stocks
Both Nifty PSU Bank and Nifty Realty jumped around 2-3% each as investors remain bullish on their positive growth outlook in the near term. In the realty pack, Macrotech Developers was the top gainer with an upside of over 5%. Sobha, Brigade Enterprises, and Phoenix gainer over 2%. Among PSU banks, Bank of India was the top gainer as it advanced over 5%. Gains of 4-5% were also seen in Union Bank, Maharashtra Bank and Punjab & Sind Bank. The robust performance of PSU banking stocks is underscored by the inherent synergy between their loan portfolios and the prevailing business cycle, said Vinod Nair of Geojit Financial.
Will the rally sustain?
The ongoing December quarter earnings season is likely to be the biggest factor driving market returns in the near term. A sharp upside of over 6% seen in the shares of Reliance Industries (RIL) in the last three sessions have supported the index. HDFC Bank results on January 16th will be keenly watched by the market for cues in the direction of Bank Nifty.
“The US CPI inflation inching up to 3.4% YoY is slightly negative from the global equity market perspective. The rate cut expected from the Fed in March this year may not materialise. It is likely to be postponed to June and, therefore, rate cut by the MPC will also get delayed,” said Dr. V K Vijayakumar of Geojit Financial.
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