An evening walk down Dalal Street | Sensex gains for 3rd straight session but off day's high

Benchmark indices continued to gain for third consecutive session on Thursday, but ended off day's high amid volatility. The consistent uptrend in rate sensitive stocks on hope of a rate cut after falling retail inflation, and positive Asian cues lifted sentiment.

"Benign CPI inflation at 2.3 percent, supported an improvement in RBI's current stance of ‘calibrated tightening’. Additionally, pick-up in industrial production at 8.1 percent supported the continuation of the rally," Vinod Nair, Head of Research, Geojit Financial Services said.

The 30-share BSE Sensex gained 150.57 points to close at 35,929.64 after hitting 36,000 levels in early trade.

The 50-share NSE Nifty failed to hold 10,800 levels, where generally technical experts expect some amount of profit booking. The index closed 53.90 points higher at 10,791.50.

"In anticipation of some firm measures to ease the credit squeeze by the new RBI governor post his meeting with PSU Bank chiefs today markets rallied in the morning but cooled off in the 2nd half on some profit booking," Viral Berawala, CIO, Essel Mutual Fund told Moneycontrol.

Asian stocks also closed higher, with shares in Japan's Nikkei, Hong Kong's Hang Seng and China's Shanghai Composite rising 1 percent each after the positive momentum seen on Wall Street overnight.

The rally was also on account of stability in crude oil prices, which were around $60 a barrel.

The key thing to look at in last three sessions, especially after pricing in states poll outcome, was the consistent outperformance in broader markets. The Nifty Midcap index gained 0.7 percent and Smallcap rose 1 percent.

The market breadth was positive. About three shares advanced for every two shares falling on the NSE.

"Fundamentals (both macro and corporate) appear to be at the start of a new up cycle, valuations are at mid cycle and market sentiment or psychology looks depressed. On balance, equity shares appear to offer more upside than downside," Ridham Desai and Sheela Rathi, Equity Strategists at Morgan Stanley said.

They have set their December 2019 Sensex target at 42,000, implying an INR and USD upside of 20 percent and 25 percent compared to MSCI EM index USD upside of 7 percent.

All sectoral indices closed in the green except Metal that fell 0.6 percent. All sectors gained between 0.65-1.4 percent.

Yes Bank was the prominent loser among largecaps, falling 6 percent after the Nomination & Remuneration Committee (N&RC) and Board of Directors finalised the recommendation for non-executive part-time chairman position. The final recommendation for MD & CEO post will be submitted to the Reserve Bank of India by the Board of Directors post their next meeting scheduled on January 9, 2019.

Sun Pharma was down 2 percent after a media report indicated that markets regulator Sebi is examining the whistleblower complaint against the company.

State Bank of India gained a percent after global research house Morgan Stanley increased its price target for the stock to Rs 375 from Rs 350 earlier while maintaining overweight call. The investment firm sees a turnaround on bad loans front in FY20 and will see a significant drop in provisions in second half of FY19 and core earnings will pick-up going ahead.

Indiabulls Housing Finance (up 5.64 percent), Bajaj Finserv (2.85 percent), Infosys (2.84 percent), HPCL (2.67 percent) and Maruti Suzuki (2.66 percent) were top gainers among Nifty50 stocks.

UPL (down 2.1 percent), Eicher Motors (1.76 percent) and TCS (1.7 percent) were losers in trade.