Benchmark indices up 1% each: 5 factors that supported the market

The market traded in the green on July 6 after a roller coaster ride on the previous day. The benchmark indices, Nifty and Sensex, were both up about a percent.

The Nifty50 went above the 16,000-mark for the second consecutive day and closed with 180 points or 1.13 percent gainst at 15,990, while the BSE Sensex rose more than 600 points or 1.16 percent to 53,751.

Meanwhile, Nifty Midcap 100 index was up 1.9 percent and Smallcap 100 index up half a percent as about five shares advanced for every four declining shares on the NSE.

These 5 factors helped the market gain momentum:

Mixed Global Cues

European markets turned very strong in their morning trade as France's CAC, Germany's DAX and Britain's FTSE gained around 2 percent each, reversing previous day's losses.

However, the environment in Asian counterparts is completely different after reports indicated that the fear of lockdowns in China increased given the rising Covid testing in Shanghai. Japan's Nikkei, Hong Kong's Hang Seng, China's Shanghai Composite and South Korea's Kospi were down 1-2 percent, while Australia's ASX 200 declined half a percent.

Fall in Oil Prices

Oil prices corrected sharply in previous session with the international benchmark Brent crude futures falling nearly $9 in single day to $102.77 a barrel, from $111.63 a barrel in earlier session. Any fall in oil prices is always a welcome move for oil importing countries like India as 80-85 percent oil is getting imported.

If the oil prices fall further and stay below $100 a barrel in coming weeks, then that could reduce the fear of inflation as well as bring the rally in equity markets, experts said.

On Wednesday, however, Brent futures rebounded to trade at $104.4 a barrel amid supply concerns though there are fears of recession in the US.

Sectoral Participation

Most of sectors participated in the Wednesday's run, taking the Nifty50 back to 16,000 mark. The rally and volatility could be ahead of June quarter earnings season that will begin later this week with TCS and Avenue Supermarts, as most of experts expect mixed set of earnings this time.

Nifty Auto and FMCG were the biggest gainers, rising 2.6 percent each. Nifty Bank, Financial Services, IT and Realty indices traded 1-1.5 percent higher, while Pharma was up over half a percent.

Volatility Cools Down

The volatility index India VIX fell by 2.5 percent, to 20.27 levels, which gave a comfort to bulls. It has been correcting from around 22 levels, but if it falls far below crucial 20 mark then there could be more stable environment for bulls which can be able to push the indices higher, experts said.

Technical View

Technically the Nifty has seen a formation of bullish candlestick pattern on the daily charts, with sentiment indicators also showing positive trend with Stochastic giving positive crossover.

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