Sensex Surges Close To 750 Pts: 5 Reasons Fuelling The Rally

The stellar run on the Indian benchmark indices continues for the sixth straight session ever since the Union budget 2021 that committed to revive the Indian economy from the Covid led downturn. Today yet again, Sensex and Nifty clocked fresh highs of 51473 and 15133, respectively. At around 11:50 am, Sensex traded with gains of 629 pts or 1.24% at 51361, while Nifty jumped 1.21% or 185 pts to 15107.

Here are few of the reason spurring optimism on the Dalal Street:

1. Global markets:

US markets last week on the S&P 500 and Nasdaq clocked best weekly percentage gains since early November. US stocks futures also point to a strong opening with gains of up to 0.57% on Nasdaq futures. Meanwhile Asian indices also were trading near record highs boosted by hopes of passage of the US coronavirus stimulus as early as this month. Besides, progress in vaccine roll out globally is also aiding sentiment.

2. Auto sector outperforms, financials gain too:

M&M is the top Sensex and Nifty gainer in today's deal. In the Budget 2021, to boost sales of vehicles and for promoting cleaner environment, government proposed voluntary vehicle scrappage policy that would result in the scrappage of older vehicles. Also, an increase in customs duty on some of the auto components will encourage domestic manufacturing.

Banking sector too has been rejoicing the announcement of the establishment of ARC to solve the bad loan problem disrupting the sector and divestment of 2 PSBs and one general insurer. At the time of writing this copy, Nifty Bank was up 1.15%, while Nifty PSU Bank traded weak with losses of up to 0.8 percent. Some of the banking and financial names that are pulling the Nifty index higher include ICICI Bank, HDFC Bank and Axis Bank.

3. Continued influx of foreign funds into Indian equities:

FPIs in the past five sessions of February net bought into Indian markets to the tune of Rs. 12,266 crore. As per the data available with the depositories, foreign funds raked in into equities amounted to Rs. 10793 crore, while in the debt market there was seen inflow of Rs. 1,473 crore, taking the total FPI investment to Rs. 12266 crore during the review period.

4. Markets get a boost from strong recovery hopes:

The RBI in its bi-monthly monetary policy announced on Friday said "2021 has begun with strong positive growth on the back of vaccination. Signs of recovery have strengthened further since the last MPC meet". For the next fiscal year 2022, the RBI estimates growth of 10.5%.

"FDI and FPI have surged in recent months, reposing faith in recovery in the economy and non-food bank credit, commercial paper sales are picking up," RBI Governor Shaktikanta Das said.

Also expenditure secretary T V Somanathan said, the centre is confident of lowering the fiscal deficit to 4.5 percent of GDP by FY 2026, considering a nominal GDP growth of 10 percent every year.

5. Technical reasons:

"We continue to remain bullish, and the Nifty has the wings to achieve 15,200. A buy-on-dips strategy would be advisable. There is ample scope for the markets to correct during intraday sessions. These dips can be utilised to make fresh long positions for higher targets. This way the risk-reward trade-off would be favourable," said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments.

There is still seen an updside for the indices and Nifty is seen to hit 15,200 levels in the next few session. Nagaraj Shetti, Technical Research Analyst, HDFC Securities holds the view that the underlying short-term trend of the Nifty continues to be positive.

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