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Sensex, Nifty close at record highs for second session: Five factors behind the rally

Further, domestic investors are also hoping for more stimulus measures announcements from the government in the near future, required to boost the economy

Rupa Burman Roy | November 10, 2020 | Updated 18:27 IST
Sensex, Nifty close at record highs for second session: Five factors behind the rally
Indian market witnessed sharp gains for the seventh straight session today as domestic market sentiments remained positive on FII inflows

Benchmark equity indices closed over 1.4% higher on Tuesday to hit fresh all-time highs amid gains across the key global equities as news about the COVID-19 vaccine bolstered investor confidence.

Extending gains for the seventh straight session, Sensex ended 680 points higher at 43,227 and Nifty rose 170 points to 12,631. Yesterday, Sensex ended 704 points higher at 42,597 and Nifty gained 197 points to 12,461 after Democrat Joe Biden defeated Donald Trump in the US presidential election.

ICICI Bank followed by ONGC, HDFC, L&T, SBI, HDFC Bank, IndusInd Bank and Bajaj Finance were among the top gainers on Sensex today. On the other hand, Tech Mahindra, Infosys, HCL Tech, TCS, Nestle India and Maruti were in the red.

Here's a look at five factors that impacted movement on Dalal Street today:

1. Vaccine hopes

Global markets rose in today's session over the potential breakthrough in the coronavirus vaccine development. In the Asia Pacific, markets in Japan, South Korea, Australia and Hong Kong were trading with healthy gains, tracking mixed cues from Wall Street as investors reacted to positive data from a late-stage COVID-19 vaccine trial.

Investors cheered as trial data from drugmakers Pfizer and BioNTech indicated their Covid-19 vaccine is more than 90% effective. Pfizer and BioNTech said they had found no serious safety concerns so far and expected to seek U.S. emergency use authorisation later this month.

2. FII inflows

Indian market witnessed sharp gains for the seventh straight session today as domestic market sentiments remained positive on FII inflows.

Data available with NSDL showed that foreign portfolio investors (FPIs) were net buyers since October. Overseas investors were net buyers with Rs 22,033 crore investment in Indian markets.

Foreign portfolio investors (FPI) have put in a net Rs 8,381 crore into Indian market in first five trading sessions of November, as participants grew more confident in view of resumption of business activities and better than expected quarterly numbers.

FPIs bought shares worth Rs 4,548.39 crore, in the Indian market on November 9, NSE data showed.

3. Biden's victory

Markets were already rallying since last Friday on expectations of fewer regulatory changes and more monetary stimulus under US president-elect Joe Biden.

Global equities have been rising on news that Democratic candidate Joe Biden defeated Republican nominee President Donald Trump in Tuesday's election.  

Investors rejoiced Biden's win as India is likely to benefit from improved relations with the US as both countries attempt to neutralise the rising power of China.

S Ranganathan, Head of Research at LKP Securities. "Bulls went on a rampage today buoyed by positive global cues and the 1.5% rise in Indices reflected the buoyant mood ahead of the festive season. Financials went berserk well supported by heavyweights across sectors barring Pharmaceuticals which witnessed profit booking".

4. Economic data

Taking cues from the US, Asian markets traded in positive territory amid improving macroeconomic data, boosting hopes that the global economy is coming back to track.

Chinese CPI rose 0.5% in October, while China exports grew at the fastest pace in 19 months in October.

In the US, the Labor Department on Friday said the economy added 638,000 jobs in October from a revised 672,000 jobs in September. The department also said unemployment rate dropped to 6.9% in October from 7.9% in September and that more Americans are working part-time.

On the domestic front, investors will keep an eye on the Consumer Price Index (CPI) and Index of Industrial Production (IIP) for September, which is slated to be released on November 12.

Further, domestic investors are also hoping for more stimulus measures announcements from the government in the near future, required to boost the economy.

5. Festive season

Among the sectoral indices, banking indices rose around 3-4% today. Barring IT and pharma, all the sectors ended in the green territory today.

The recent surge in equities was driven by banking and financials on improved business outlook post Q2 results and bounceback of economic activities ahead of festival season. With companies seeing improvement during the festive season and the economy heading towards normalcy, many investors' hope for an economic rebound by this quarter led to stock-specific buying.

Strong September quarterly earnings announcements by lenders such as ICICI Bank, SBI and Axis Bank have boosted banking stocks for the seventh straight session.

Hindalco, Gail (India), Info Edge India, Tata Power, Aarti Industries, Bata India, Exide Industries, Future Consumer, Gillette, Hindustan Copper and Ruchi Soya among others will report September quarter earnings today.

Vinod Nair, Head of Research at Geojit Financial Services said, "Indian indices moved in sync with global peers touching fresh highs with continued support from banking stocks while IT and Pharma sectors witnessed heavy sell-offs. An uptick in beaten-down stocks & sectors were visible today viewing hopes of recovery in the business."  

Technical View

The bulls continued their march on Dalal Street for the seventh session in a row today, with both Sensex and Nifty hitting new highs for the 2nd day. While Sensex jumped 719 points in the session to breach 43K mark and hit an all-time high of 43,316, Nifty gained 182 points to touch a fresh high of 12,643 today.

Geojit Financial Services said in its note," The gapped up opening should take us closer to the PRZ of 12800 discussed yesterday. Big range moves are expected, calling for deft handling so as not to end up on the wrong side. The potential reversal zone, needs confirmation as the ongoing momentum has potential for 13400-13700. Towards this end, until a pull back below 12400 unfolds, it may be safe to play the prevailing uptrend."

Ajit Mishra, VP - Research, Religare Broking said,"Nifty is not showing any sign of slowing down and may take a breather around 12,800. Traders should align their positions accordingly and use dips to accumulate stocks that are participating in the rally."

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