Stock market: Why Sensex, Nifty surged today; what's ahead?
Sensex and Nifty’s almost vertical rally on Thursday afternoon surprised many but the market gains were not restricted to largecaps, as two of every three stocks that traded for the day ended higher. That said, India’s performance was largely in line with European and Asian peers, which gained 1-2 per cent for the day, as bets increased on a 25 basis points Fed rate cut next week. Stocks gained on the day of weekly F&O expiry, ahead of next week’s September 17-18 Fed policy meet.
Reports suggesting China looking to cut interest rates on more than $5 trillion of outstanding mortgages as early as this month and ECB policy meeting scheduled for later in the day raised hopes of policy easing globally, lifting risk appetite.
Fear gauge India VIX, which suggests the likely volatility in the market over the next 30 days, fell 3.26 per cent to 13.18.
Narendra Solanki, Head Fundamental Research at Anand Rathi Shares and Stock Brokers said while the domestic market opened higher buoyed by a tech-fueled rally on Wall Street overnight, during the afternoon session it further gained strength and traded sharply higher, as traders preferred to buy large cap stocks.
“The markets further gained strength on news of China cutting rates by 50 bps on $5 trillion mortgages as soon as this month to boost consumption came out ahead of a European Central Bank (ECB) policy meeting later in the day; providing much needed sentimental boost to the markets,” Solanki said.
The BSE Sensex briefly crossed the 83,000-mark before closing the session at 82,962.71, up 1,439.55 points or `1.77 per cent. Nifty soared 470.45 points or 1.89 per cent to 25,388.90. The rally in largecaps was led by Reliance Industries Ltd, Bharti Airtel Ltd, HDFC Bank Ltd and Infosys Ltd. The four stocks alone contributed about 500 points to the Sensex rally.
Bharti Airtel climbed 4.36 per cent to Rs 1,646.50. NTPC climbed 3.87 per cent to Rs 404.80. Mahindra & Mahindra added 3.36 per cent to Rs 2,742.25. JSW Steel Adani Ports and SBI added 2.5-3 per cent. Tech Mahindra, Tata Steel Larsen & Toubro, Kotak Mahindra Bank and Infosys gained over 2 per cent each.
“While the session remained subdued for the most part, strong buying in heavyweight stocks across sectors propelled the index sharply upward in the final hours. This surge has reversed the previous weakness, positioning Nifty to potentially test the 25,550-plus zone. On the downside, the 24,900-25,150 range is expected to provide support in the event of any dip,” said Ajit Mishra – SVP, Research, Religare Broking.
Mishra said market participants should focus on sectors and themes displaying consistent trends and prioritise large-cap and major midcap stocks for fresh buying opportunities.
Reliance Industries, the most-valued stock on Dalal Street rose 1.9 per cent to Rs 2,958.35. HDFC Bnak was up 1.32 per cent at Rs 1,666.
“Market fabric is changing. It has now once again started favoring high-growth and high-quality companies. This is driven by expectations of a dovish interest rate environment. Earnings expectations remain strong for high-growth and high-quality companies. However, expected earnings in the cyclical segments of the market have started weakening,” said Vinay Paharia, CIO, PGIM India Mutual Fund.
Rupak De, Senior Technical Analyst at LKP Securities said Nifty has broken out of its recent consolidation on the daily chart, indicating a rise in optimism. Additionally, the index has been sustaining above the critical 21-day EMA, a near-term moving average.
“The RSI on the daily chart shows a bullish crossover, reinforcing the positive sentiment. The trend is expected to remain strong, as the index closed above the recent consolidation high. On the upside, the rally could potentially continue toward the 25,470–25,500 range, while support is seen at 25,100,” De said.
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