Stellar rally: Sensex soars 402 pts, Nifty closes at 8325

Equity benchmarks surged for the second straight session Monday, even as players are divided on whether the rally can sustain.

The 30-share Sensex closed at 27507.30, up 401.91 points or 1.48 percent over its previous close. The Nifty closed at 8325.25, up 133.75 points or 1.63 percent.

In the last two sessions, the Sensex has risen around 908 points and the Nifty around 268 points.

There was good demand for mid cap shares too, with S&P BSE Midcap Index gaining over 2 percent.

Brokers attributed much of the rise in the last of couple of sessions to short covering of positions, and said there was not much of fresh buying by institutional investors.

They said the possibility of the Fed deferring its rate hike beyond June, or even September, further boosted sentiment.

“We think this (latest jobs data) will not be enough for the Fed to move in June maybe not even September because both we have seen is average hourly earnings are still stuck somewhat in a trading range, year-over-year (Y-o-Y) that number is up 2.2 percent which is not quite enough for the Fed to make a move,” Hans Goetti, head of investment-Asia, Banque Internationale, said in an interview to CNBC-TV18.

“Our base case is a move by the Fed in September at the earliest could just as well be a little bit late to maybe December or even 2016,” he said.

Auto, bank and metal shares were the star performers of the day. FMCG shares were the biggest laggards.

Many market experts feel valuations are looking attractive after the near 10 percent decline from the record highs in March.

“If you are a late comer to the party or a little sceptical around the edges this is actually an entry opportunity and you should be buying now,” said Dipan Sheth of HDFC Securities in an interview to CNBC-TV18 today.

“It doesn’t mean markets can’t fall, of course not, they can, but the downside from here on looks limited and the upsides look much more promising than what they did maybe a month or two ago,” he said.

Players tracking technical indicators say the Nifty holding above its 200-day moving average (DMA) is a reassuring sign.

“The crossover of the 50 DMA and the 200 DMA are important signals for long-term trends on the market,” said Dipen Mehta, BSE & NSE member, in an interview to CNBC-TV18.

“I think that if you go back to 2003 to 2007 bull market, there were five occasions where the 200 DMA was breached briefly for a few trading sessions and that acted as a support level and the markets rebounded from there,” he said.

Bank of Baroda was among the prominent gainers of the day, with the stock rising 17 percent. The company’s fourth quarter earnings fell short of market expectations, but improvement in asset quality was better than what analysts had estimated.

HDFC, State Bank of India, Infosys, ICICI Bank, Tata Motors and Sun Pharma were among the major contributors to the rally.