Market indices ended higher on Thursday, tracking gains in index-heavyweights Reliance Industries, Infosys and SBI, amid positive cues from global equities. Awaiting cues from the US Presidential elections, Sensex ended 724 points higher at 41,340 and Nifty rose 211 points to 12,120. Yesterday, Sensex ended 355 points higher at 40,616 and Nifty rose 95 points to 11,908.
SBI, followed by HCL Tech, Tech Mahindra, Asian Paints, Infosys, Tata Steel, TCS and Reliance Industries were among the top gainers on Sensex. On the other hand, ONGC and Titan were the laggards.
In the forex market, rupee zoomed 40 paise to close at 74.36 against the US dollar.
Here's a look at five factors that led to the rally on Dalal Street today:
1. US elections
Global markets traded 2-3% higher today amid expectations of Joe Biden's victory in the US Presidential elections. However, developments in the US presidential race and coronavirus fears kept market highly volatile.
Democratic candidate Joe Biden is ahead of Republican nominee President Donald Trump, winning Michigan and Wisconsin and just 6 votes short of 270 in terms of electoral votes. As per latest numbers, Joe Biden has won 264 electoral college votes, while US President Donald Trump has won 214 votes.
Vinod Nair, Head of Research at Geojit Financial Services said, "Domestic market moved in tandem with the global market and marched to 8 months high, in expectation that the US presidential election is moving in favour of the Democratic Party. Further, investors are expecting new supportive measures from ongoing Fed policy meet while keeping rates unchanged. Positive result season and increasing inflows from foreign markets will help the market to maintain its optimism going forward."
2. Improving macro figures
Investors took note of the improving macroeconomic data, boosting hopes that the global economy is coming back on track. India's manufacturing growth expanded at its fastest pace in over a decade in October and activity in India's dominant services industry, expanded for the first time in eight months in October as demand surged.
The Nikkei/IHS Markit Services Purchasing Managers' Index climbed to 54.1 in October from September's 49.8. It was the highest reading since February and comfortably above the 50-mark separating growth from contraction.
Further, data available with NSDL showed that foreign portfolio investors (FPIs) were net buyers since October month, which has also supported the Indian stock market.
As per NSDL data, FPIs have invested Rs 3,188 crore in November, and Rs 21,826 crore in October.
FPIs bought shares worth Rs 146.22 crore in the Indian market on November 4, NSE data showed.
3. Stimulus measures
Traders said investors hoped a win by challenger Joe Biden in the presidential race might result in an additional economic stimulus for the coronavirus-hit economy.
Moreover, the US Federal Reserve is scheduled for another policy-decision Federal Open Market Committee (FOMC) meet. The central bank is most likely to keep interest rates near-zero and reaffirm their commitment to support the pandemic-struck economy, shifting the focus on further stimulus.
The Bank of England also ramped up stimulus by a bigger-than-expected 150 billion pounds ($195 billion), in a move to cushion Britain's struggling economy against the hit from a second coronavirus lockdown. The BoE also raised the size of its asset purchase programme to 895 billion pounds ($1.16 trillion), 50 billion pounds.
4. Rally in banking and IT sector
IT stocks led the rally ahead of the outcome of US presidential elections. Index-heavyweights like Infosys, TCS and HCL Tech were among the top contributors towards Sensex's gains.
Bank heavyweights were also in heavy demand today, with State Bank of India, HDFC Bank leading the pack. Banking stocks witnessed traction after SBI reported a robust performance in its September quarter earnings.
Among other sectors, except realty, all the other indices traded in the green wherein metal, capital goods were the top leaders in the pack.
5. Technical outlook
On markets closing --Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments said, "The trend of the Nifty continues to remain positive. The hurdle of 11900-11950 has been crossed convincingly on the back of very good volumes. We should be achieving the targets of 12300-12400 during the course of the November series. The Index now has very good support at 11500."
Ajit Mishra, VP - Research, Religare Broking said,"Nifty opened above the psychological hurdle of 12,000 in early trade and gradually inched higher as the session progressed. The way the benchmark indices have surged of late, it seems that participants have already priced in the possibility of a clear winner in the US elections while the counting is still underway. Considering the scenario, we suggest maintaining a positive yet cautious approach and continuing with the stock-specific trading approach. Also, keep a close watch on global markets and earnings announcements for cues."
Shrikant Chouhan, Executive Vice President (Equity Technical Research), Kotak Securities said,"Nifty closed above the 12050 levels, which is bullish break out level for the market. Nifty has spent 175 days below the psychological level of 12000. It is the fastest recovery from the panic lows in the history of Indian markets. Rise in the US markets and fall in the dollar has helped the market to surpassed and closed above the level of 12000. Nifty is 300 points away from all-time highs and now we have to be more careful as traders make maximum mistakes near the highs. On an immediate basis, 12200, 12350 and 12430 would be the biggest hurdles. Below the level of 12000, Nifty would halt at 11840. Be stock specific for next few days or the strategy should be to buy on dips."
Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking said," We have finally broken out from some crucial resistance and hence, looking at the price behavior, we expect this northward move to continue towards 12250 - 12400 now. But since, the actual verdict is yet to come; we cannot just overlook this development. Traders should keep a close track of it and how markets react post the outcome. But despite this, we still believe that in case of any weakness 12000 - 11900 should now act as a sheet anchor for the bulls."