Equity benchmark indices closed at record highs on Monday, in line with positive global equities. Gaining for the sixth straight session, BSE 30 share barometer Sensex closed 617 points higher at 51,348. Similarly, Nifty gained 191 points to end at 15,115. Both benchmarks hit fresh lifetime highs of 51,523 and 15,159 earlier today. On Friday, Sensex ended 117 points higher at 50,723 and Nifty gained 28 points to 14,924. During last week, Sensex rose 4,445 points or 9.6% and Nfty gained 1,293 points or 9.49%.
Here's a look at five factors that led to a rally on Sensex and Nifty today:
1. Broad-based rally
Buying triggered by budget 2021 and RBI's policy stance helped the market cap reach a record closing high of Rs 202 lakh crore today.
Strong buying was witnessed in index heavyweights from banks, auto, and realty space that supported the market rally. Mahindra and Mahindra, followed by Axis Bank, ICICI Bank, IndusInd Bank, SBI and Bajaj Finance were among the top gainers on BSE, while Sun Pharma, Bajaj Auto, ITC, Bajaj Finance, Kotak Bank, NTPC were the laggards.
Sectorally, except for FMCG and PSU Bank, all the indices closed in green territory, with over 3% rise in auto and media index, followed by 2% rise in IT and realty index.
2. Foreign fund inflows
Foreign institutional investors (FIIs) have turned buyers in the Indian equity market since February 1 as positive sentiment post-Union Budget 2021 sparked a rally in fund inflows.
On Friday, foreign portfolio investors (FPIs) bought shares worth Rs 1,461.71 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 1,418.65 crore in the Indian equity market on February 5, provisional data showed.
Earlier, between February 1-5, overseas investors pumped in a net Rs 10,793 crore into equities and Rs 1,473 crore in the debt segment. Amid pre-budget volatility, FIIs had sold shares worth Rs 12,731 crore in the domestic market between 22-31 January.
Vinod Nair, Head of Research at Geojit Financial Services said, "Strong global cues supported the domestic rally. PSU Banks, which was on a bull run paused today with some correction noticeable in FMCGs. The overall market is maintaining its buoyancy with the rally in all sectors, especially auto, IT and metals. Improved domestic outlook is encouraging sustained FPI inflows"
3. Positive global cues
Domestic shares mirrored the gains in their Asian peers that traded near record highs on hopes of USD 1.9 trillion stimulus plan. Overseas, Asian stocks were trading mostly higher on Monday, with Nikkei gaining over 2%. Although investors watched developments from China after the State Administration for Market Regulation released a new set of rules that are set to put pressure on leading internet services in the country such as Alibaba's Taobao or Tencent's WeChat Pay.
In the US, Nasdaq and S&P 500 hit all-time highs on Friday on stronger-than-expected corporate results in the fourth quarter and on US stimulus expectations.
European stocks opened higher on Monday with markets tracking positive sentiment in Asia.
World stock markets were also enthused as oil prices breached $60 a barrel boosted by supply cuts among key producers and hopes for further US economic stimulus.
Anand James, Chief Market Strategist at Geojit Financial Services said,"Brent scaled the $60 per barrel mark while global equities continued to rally. India also tagged along, leaving only FMCG and PSU indices in the red among the sectoral indices, while the metal index gained the most, with a 3% jump. US stimulus expectations continue to be the major driver."
4. Technical outlook
In today's session, IT, auto and metal shares rallied while PSU banks and FMCG shares declined. Sensex hit a record high of 51,523.38 and Nifty hit a record high of 15,159.90 today. The BSE Mid-Cap index rose 1.50% and the BSE Small-Cap index gained 1.53%.
After Sensex's climb to 50k, Nifty's breach of the psychological level of 15,000 mark has created new resistance levels for the index and is likely to face some consolidation in the index this week.
Reliance Research said in its report," Due to current set-up, the index may witness near-term decline or oscillate in the narrow range before a fresh up-move starts. In case of decline, the index will find support at around 14,700-level initially and 14,400-level subsequently. A stable move above 15,000-level will strengthen the index for its next leg of up-move, which will help the index to test 15,250-level. "
Sumeet Bagadia- Executive Director, Choice Broking said," Technically, the index has been trading above its 21 Days Moving Average which shows a positive trend for the time being and based on which further upside would be there during upcoming trading sessions. At the present level, Nifty has strong resistance at 15250 levels while downside support comes at 14850 levels.
Ashis Biswas, Head of Technical Research at CapitalVia Global Research Limited said," The market witnessed strong trends and an attempt to overcome the resistance level around the Nifty 50 Index level of 15160-15190 (Important Fibonacci extension zones). While sustaining above 15000 is the key factor from a short-term perspective, maintaining above this level market to gain momentum and open the gate for a movement till 15250-15270. The momentum indicators like RSI, MACD to recover and market breadth to maintain its strength.
5. Positive Q3 earnings
Traders said the recent uptick in high-frequency key economic data, prospects of Covid-19 vaccines pulling the global economy out of recession and rebound in corporate earnings kept investors optimistic worldwide. As per analysts, forthcoming quarterly results will guide the market further.
While Mahindra & Mahindra's (M&M) was the top gainer on BSE post Q3 results announcement, Bharat Petroleum Corporation (BPCL) advanced 1.17%, ahead of Q3 earnings today.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said,"The fundamental factor supporting India's outperformance in February ( Nifty up by 7%) is the Q3 results, which have beaten expectations by an impressive margin, across industries. There are clear indications that we are in an expansionary phase in the earnings cycle. If this momentum sustains and the FIIs continue to buy, the market can move up further. The excellent results from the banking sector saw the Bank Nifty move up by 17 % so far in Feb with SBI clocking big gains. The trading opportunities in PSU banks are not likely to last long. Investors should stick to quality. The focus on infra capex in the budget has brought renewed interest in capital goods stocks. More money is likely to flow into IT too."
Better-than-expected key economic data release has also kept sentiments positive.
Likhita Chepa, Senior Analyst at CapitalVia Global Research Limited-Investment Advisor said," Indian government is confident of reducing the fiscal deficit by FY26 which is good indication for the market. India forex reserves has jumped 4.85 billion$ to record 590.18 billion. FPIs and FIIs continue to buy in the Indian market.