Sensex, Nifty: Reasons behind the stock market rally today; will gains sustain?

Benchmark stock indices Sensex and Nifty saw a smart rally on Friday, as IT as a pack rebounded following the quarterly results of Infosys Ltd and Tata Consultancy Ltd.  The two stocks alone contributed about 550 points positively to the Sensex's rally. The fact that US investors absorbed a data showing increase in CPI reading overnight, and Asian markets did not fall much despite a jump in crude oil prices amid geopolitical tensions lifted sentiment. A rise in shares of Reliance Industries for the third straight day also added to the sentiment.

TCS, Infosys lift mood
Shares of five IT firms led gainers on Sensex, Infosys gained 7.80 per cent, followed by Tech Mahindra Ltd (TechM), Wipro and TCS that gained 4.2 per cent, 4.07 per cent and 3.98 per cent respectively. HCL Technologies Ltd also gained 3 per cent. Among the IT names, Wipro and HCL Tech would report their quarterly results today.

Also read: Stock recommendations by analyst for January 12, 2024: RVNL, Exide Industries and LT Foods

RIL up for 3rd day
Reliance Industries has been contributing to recent Sensex gains of late. The stock rose 0.70 per cent to hit a high of Rs 2,738.85 in Friday's trade. The stock was up 2.63 per cent in Thursday and 2.70 per cent in Wednesday.

Ahead of Friday's session, Angel One said RIL has emerged as a savior for Nifty, as it stood strong and "handled the market to withhold the upright gesture with its march to lifetime highs."

Market valuations
Prabhudas Lilladher in a strategy note said Nifty is still trading at 10.8 per cent discount to 10-year average, as it estimates 12.6 per cent EPS CAGR for the index over FY24-26. "We increase our base case Nifty target to 24,544 (22,584 earlier) with clear focus on quality and companies with strong balance sheets and business moats," it said.

Asian markets stable 
Japan's Nikkei rose 1.5 per cent, while China's Shanghai Composite and Hong Kong's Hang Seng edged 0.3-0.4 per cent lower. The market not only absorbed the US CPI data but also strikes by the US and the UK on Iran-backed Houthi targets in Yemen after Red Sea attacks. The move pushed crude oil prices higher. Asian markets, however, stayed relatively stable.

Also read: Stock recommendations by analyst for January 12, 2024: RVNL, Exide Industries and LT Foods