FIIs' return, strong global cues among 5 factors driving Sensex, Nifty up 1% in final session of FY24

The BSE Sensex recorded a gain of 1.6 percent for March 2024, while in FY23-24 the index rose nearly 25 percent

Equity benchmarks the Sensex and Nifty soared around 1.5 percent in the afternoon on March 28 on track to ending to financial year 2023-24 on a high, buoyed by FII buying, positive global cues and a sharp rally in market heavyweights.

The Sensex closed 655.04 points or 0.90 percent higher at 73,651.35, and the Nifty rose 203.20 points or 0.92 percent to 22,326.90. About 1,738 shares advanced, 1959 declined, and 102 were unchanged.

Here are the 5 factors driving the rally today:

Financials rise

Financials rose after the Reserve Bank of India (RBI) eased recently tightened rules for lender investments in alternative investment funds (AIFs).

Instead of a 100 percent provision, banks now only need to set aside funds for the portion of their investment in an AIF that is further invested in debtor companies.

Nifty Bank and Nifty PSU Bank indices rose over a percent. ICICI Bank and State Bank of India were among the top gainers on Nifty, rising 1.6 and 1.9 percent.

Follow our market blog to catch all the live action

Index heavyweights Bajaj Finance and Bajaj Finserv rose about 4 percent each following a Moneycontrol report that Bajaj Housing Finance had initiated preliminary talks with several investment banks about a potential initial public offering (IPO).

Sharp rally in other heavyweights such as Hero MotoCorp, M&M, JSW Steel also lifted the Nifty 50 above the 22,450 level.

Strong global cues

US stocks ended higher overnight, with the Dow leading gains and the S&P 500 setting a closing record. Asian and European markets also gained as ahead of the much-anticipated US core personal consumption expenditures (PCE) price index data, the Federal Reserve's preferred measure of inflation.

Investors expect inflation to shrink leading to the Fed cutting rates from June onwards. Steven Blitz, TS Lombard’s chief U.S. economist believes, markets will continue to rally even if the Federal Reserve chooses not to cut interest rates this year.

Strong FII inflows

Foreign portfolio investors bought Indian equities worth Rs 2,170 crore on a net basis in the previous session, while domestic institutional investors purchased a net Rs 1,198 core worth of stocks.

After remaining net sellers in the past two months, FIIs have turned buyers in March and have bought shares worth Rs 3,000 crore, so far, this month.

The rise in FPI inflows comes on the back of improving macros, declining inflation, hopes of rate cuts from June and the possibility of the Modi government returning for a third term. The record-high performance of domestic equities and robust financial activity also aided the positive sentiment.

Also Read | Bajaj Finance arm Bajaj Housing Finance starts preparation for IPO targeting $9-10 billion valuation

Macho Macros

Strong macro forecast also pushed markets higher on March 28. Morgan Stanley has raised India’s gross domestic product (GDP) growth forecast for FY25 to 6.8 percent from its previous estimate of 6.5 percent, highlighting the country’s strength and stability as hallmarks of the current financial cycle. It also revised its growth forecast for FY24 to 7.9 percent.

More importantly, the earnings growth in India is expected to remain strong, going forward. Cyclically, India looks well-positioned and the domestic cyclical sectors should do well.

Technical factor

The short-term technical and sentiment indicators turned extremely oversold leading to a correction in the market. A bounce was due from there, Jay Vora, market analyst at Indiacharts.com, said.

"Now, 22,526 is a major resistance level for the Nifty on the upside. Below this level, a correction could still be in place. However, if the index manages to breach this level, the positive momentum could continue in the near term," he said. If the 22,526 is surpassed on the upside, largecaps could outperform because they will be relatively stronger.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.