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Sensex surges 428 points, Nifty ends near 12100; 5 factors that fuelled Friday's rally

Vedanta, Axis Bank, SBI, Hindalco and YES Bank were among the top gainers on Friday. Dr Reddy, Bharti Airtel, Kotak Bank, Zee Entertainment and Bajaj Auto were among the top losers.

Rupa Roy | December 13, 2019 | Updated 19:39 IST
Sensex surges 428 points, Nifty ends near 12100; 5 factors that fuelled Friday's rally
Positive domestic cues such as continued reform policies by the government to push the growth rate further and 1-month low rupee against the US dollar also kept investors optimistic towards the market

Indian benchmark indices, Sensex and Nifty, ended at robust note on Friday following firm strong global cues and buying in select index heavyweights. The BSE Sensex closed 428 points higher at 41,009 and Nifty ended the day's trade at 12,086, rising 114 points against its last close. Where Sensex closed mere 154 lower at 41,009.71 as against the lifetime high of 41,163.79, Nifty's ended at 12,086, just 72 away from the all-time high of 12,158.80.

Vedanta, Axis Bank, SBI, Hindalco and YES Bank were among the top gainers on Friday. Dr Reddy, Bharti Airtel, Kotak Bank, Zee Entertainment and Bajaj Auto were among the top losers.

All the major sector-based indices ended in the green, barring pharma that ended flat, with PSU banking and metal rising over 2% each, followed by a 1% rise in auto and realty scrips.

Prospects of averting fresh tariff and inking an interim trade deal between the United States and China, coupled with hopes of a swift Brexit after thumping election win by Boris Johnson's Conservative Party in UK Elections 2019 spurred risk appetite globally.

"Hopes of a smooth Brexit following a decisive victory in the UK elections, hopes of a trade deal between the US and China and hopes of fresh sops by the GOI today kept Indian Markets buoyant through the day with both the Nifty and the Sensex recording 1% gains today," said  S Ranganathan, Head of Research at LKP Securities.

Here are the five factors that fuelled the market rally:

1. Gain in metal and banking stocks

Almost all sectoral indices posted decent gains on Friday, trading in-line with the benchmark index Sensex and Nifty. PSU bank gained the most, rising over 4% by the closing bell, followed by 2% advance in metal scrips.

PSU Bank outperformed all the other sectors, led by gains in Union Bank of India, Punjab National Bank, OBC, Canara Bank, State Bank of India, Bank of Baroda and Bank of India. The rally was attributed to reports that banks are likely to get payments from Essar Steel resolution this month. Cheering the news, shares of UCO Bank gained as much as 18.42%, followed by Corporation Bank share price that was up 8.21%. Among others, shares of State Bank of India (SBI) and IDBI Bank gained between 3-5% on the Bombay Stock Exchange.

According to another report, the government is working on the recapitalisation of banks. This combined with the recent approved changes to the insolvency law (IBC) by the Union Cabinet helped in record-high closing in banking indices.

Metal stocks gained up to 5% following news that the United States had reached a "deal in principle" with China to resolve a trade war. The closure of the 17-old month trade war between the world's two largest economies may improve global demand for the industry as China is the largest metal producer in the world. Boosted by the positive US-China trade developments, the BSE Metal index rose over 2.30%, while NSE metal rose 2.26% by Friday's close, led by index heavyweights Tata Steel, Vedanta, SAIL, Jindal Steel.

2.US-China reach phase one of trade deal

Global key indices traded at record high levels after Donald Trump signed off on an initial trade agreement with China. Aided by some relief news on the trade war front, domestic indices tracked bullishness from the Asian market on Friday.

The United States had reached a "deal in principle" with China to resolve a trade war. To avoid the new round of tariffs on Chinese goods due on Sunday, December 15, US announced rolling back existing levies, in exchange for purchases of American agricultural products.

"US and China were nearing a 'big deal' that could avoid fresh tariffs, planned to go in effect December 15, and potentially roll back some existing duties," Donald Trump said on Twitter Thursday.

3. Boris Johnson's landslide win may channelise a smooth Brexit

European indices rallied across the board on Friday, following the victory of British Prime Minister Boris Johnson. Jhonson, who campaigned on a vow to "Get Brexit Done", won with a commanding majority of 326 seats in Britain's Parliament. In the pre-election manifesto, the Conservative leader had promised to get Britain out of the European Union by January 31 and a new trade deal would be signed by the end of 2020.

In a separate note, the European Central Bank (ECB) kept interest monetary stimulus unchanged and decided to keep its main deposit rate at negative 0.5% on Thursday, which was another positive for the European markets.

4. Hopes of fresh stimulus from FM Sitharaman's press conference

The already buoyant market participants were expecting some fresh government measures to be addressed in today's scheduled press conference by FM Sitharaman. In the press conference that started post market hour, Finance Minister Nirmala Sitharaman talked about the state of the economy and listed various measures taken during the Parliamentary Winter Session, to avert the current slowdown in the economy.

While addressing a press meet, FM Sitharaman refuted reports of GST rate hike and said that she has not discussed GST rate hike with her team yet.

"The Government too is stepping out of their comfort zone and firing all cylinders to push the growth rate. Given the underlying slowdown in the economy, such Government dispositions are sending apt signals which could boost the economy,"   said Jimenez Modi, Founder & CEO of SAMCO Securities & StockNote.

Chief Economic Advisor Krishnamurthy Subramanian reviewed a host of reforms in the last few months that have been set up by the government in order to increase liquidity in the economy. He listed measures to encourage consumption, increase investment and the reforms taken in recent times. He added that 40 labour laws that existed at the Centre have been codified into four codes. Subramanian also said that 2.3 crore jobs have moved from casual jobs to regular salaried jobs.

5. Nifty's Technical Outlook

Benchmark index Nifty pushed higher on Friday's trade, following buoyancy in global key indices. Commenting on today's positive trend, Ajit Mishra, VP - Research from Religare Broking said that the positive global cues today triggered gap-up start in the Nifty and then it moved from strength to strength till the end.

"Market managed to cross the psychological resistance level of 12,000 despite weak domestic CPI & IIP data, released yesterday," said Vinod Nair, Head of Research at Geojit Financial Services.

"A long bull candle was formed today with back to back opening upside gaps (both the upside gaps are unfilled). Technically, this pattern indicates a sharp comeback of bulls from the lower levels," said Nagaraj Shetti, Technical & Derivative Analyst at HDFC securities.

"Nifty as per weekly time frame formed a long bull candle with lower shadow. This candle pattern was formed immediately after the formation of the bearish engulfing type pattern in the last week. This is a positive indication and one may expect further upside in the short term. A sustainable move above 12158 levels could nullify the negative implication of bearish engulfing," he further said.

Share Market: Sensex ends 428 points higher, Nifty at 12,086; Axis Bank, SBI, Vedanta top gainers

Metal stocks: Tata Steel, Vedanta gain up to 4% as US, China near trade deal

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