Reversing from yesterday's lows, market benchmarks jumped on Tuesday to trade near record highs, tracking cues from positive global equities. Sensex added 834 points to 49,398 and Nifty gained 239 points to 14,521. Sensex and Nifty today touched intraday highs of 49,499 and 14,546, respectively.
Earlier on January 13, Sensex and Nifty hit fresh lifetime highs of 49,795 and 14,653, respectively.
Bajaj Finance, followed by SBI, ONGC, IndusInd Bank, Reliance Industries, HDFC and Axis Bank were among the top gainers. On the other hand, ITC and HDFC Bank were the laggards.
Here's a look at five factors that brought indices near record highs today.
1. Global markets
Benchmark indices extended gains in afternoon trade, buoyed by positive Asian and European markets. Shares climbed overseas on Tuesday as the coming changing of the guard in the US raised hopes for more support for the economy. Market participants also awaited remarks from the nominee for Treasury secretary, Janet Yellen's speech, scheduled later today Investors were also enthused with the US President-elect Joe Biden taking office tomorrow.
Asian shares climbed on Tuesday as investors were enthused after data out on Monday showed that China's economy actually picked up speed as the year closed. The world's second-largest economy was one of the few to grow over 2020. Australian shares also climbed almost 2% as investors bet on news that Queensland state was set to lift virus-led restrictions.
On Wall Street, futures also looked a little steadier as S&P 500 added 0.67% and NASDAQ futures 0.97%. US markets were shut yesterday for Martin Luther King Jr. holiday.
European markets closed slightly higher led by auto stocks. Rising coronavirus cases and vaccination continued to dominate headlines.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said,"The major positive development for markets today is the Treasury Secretary-elect Janet Yellen's comment on the need for 'big stimulus'. Further big stimulus along with the huge liquidity created by the unprecedented monetary stimulus can keep markets buoyant."
2. FII inflows
Despite the weakness in the last two sessions, foreign institutional investors (FII) have not stopped buying domestic securities. As per experts, the trend is likely to continue on the back of positive earnings ahead of Budget. Foreign portfolio investors (FPIs) bought shares worth Rs 650.60 crore in the Indian equity market on 18 January, provisional data showed.
Overall, in 2020, FIIs made a net equity investment of Rs 1.5 lakh crore into the Indian market, as per data available with NSE. This is when most Asian and emerging markets witnessed outflows. Till January 20, 2021, FIIs have pumped Rs 16,901 crore into the equity market, amid rising hopes for strong economic recovery and significant decline in domestic COVID-19 cases compared to western countries, especially US and European nations. Weakness in dollar index and steady currency also supported inflows.
3. Hopes from Budget 2021
The sharp fall in the last two trading days indicated profit-booking by the investors ahead of the Union Budget. Gains in large caps such as Reliance Industries, HDFC and Infosys today suggested that investors were betting on quality stocks ahead of Budget 2021, scheduled to be presented in Parliament on February 1, 2021.
Ajit Mishra, VP - Research, Religare Broking said, "There'll be no shortage of trading and investment opportunities, thanks to prevailing earnings season and the upcoming budget. Amid all, we suggest not to go overboard and stick to the quality names and accumulate them on dips."
4. Q3 earnings
The focus of market has shifted to third-quarter earnings, cheered by better-than-expected performance by most corporates. September quarterly earnings announcements from yesterday also helped in pushing the market upwards.
Due to the ongoing earnings season, there's a rise in volatility on the domestic front. With most December quarter earnings being decent so far, investors are betting on quality stocks. Decreasing COVID-19 cases and the beginning of the vaccine drive are also positive factors.
As per market participants, the bullish rally may extend to all-time highs as excitement is likely to continue till the Budget.
Today, industry majors like ICICI Lombard General Insurance Company, Alembic Pharma, CEAT, CSB Bank, DCM Shriram, L&T Infotech, Tata Communications, Tata Metaliks, Tata Steel among others will report Q3 earnings, which will also set the tone for the stock market tomorrow.
5. Technical outlook
Equity index Nifty 50 today opened with a gap up after two days of slump, with heavy buying sentiment in index heavyweights like RIL, HDFC, Bajaj twins, SBI, ONGC. Due to consecutive decline in the index for the past 2 days, major technical indicators on the near-term timeframe chart tested their oversold zone. On the higher side, NSE Nifty 50 crossed the major hurdle at around 14,500-level. As per analysts, Nifty has resistance around the 14550-14600 levels.
As per traders, valuations of major stocks have also cooled off after two days of slump and investors picked up performance majors ahead of the budget.
Today, market breadth also favoured advances, with the advance-decline ratio at 3:1. All sectoral indices closed in green territory, with metal, media, financials and banking index closing over 2% each. Meanwhile, the volatility index fell over 6% today.
Ashis Biswas, Head of Technical at CapitalVia Global Research Limited said," Market is aligned to be in a range-bound movement between the levels of 14180-14680. Our research suggests, a decisive breakout above the zone of 14680-14700 could lead to an improvement in market breadth, and a rally till the levels of 14850-14870."
"Going ahead, 14450 and 14320 would now be seen as immediate supports, whereas 14600-14620 would be the immediate range to watch," said Ruchit Jain (Senior Analyst - Technical and Derivatives, Angel Broking.