The equity market rally continued for the seventh consecutive session, with the Nifty50 crossing 18,500 and the Sensex hovering on 62,000 mark for the first time, on October 18.
And, more importantly, the Indian equity market rallied despite weakness in its global peers and a sustained spike in crude oil prices to above $85 a barrel.
The BSE Sensex hit a fresh record high of 61,963.07 before closing 459.64 points higher at 61,765.59, and the Nifty50 jumped 138.50 points to close at 18,477 after hitting an intraday all-time high of 18,543.15. Both the indices rallied around 30 percent each in the current financial year and registered more than 51 percent gains so far in 2021.
"The uptrend in the market looks set to continue on the back of positive news. In the short-term the market momentum is so strong that it is likely to eclipse valuation concerns. Long-term investors should not chase this momentum and buy overvalued stocks. Instead, they should remain invested in high quality stocks and continue to invest in a disciplined manner," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
On the risk, he said, rising crude and sustained uptrend in commodity prices are macro headwinds for the Indian economy.
Here are five factors that are driving the market rally:
Rally in Technology Stocks
Technology stocks continued to log in a buying spree among investors as the Nifty IT index jumped 1.57 percent on Monday. Strong earnings growth by Mindtree, Wipro and Infosys last week and the weakening rupee against the dollar also lifted sentiment.
Infosys, the second largest IT services provider in India, gained more than 4.5 percent. Mphasis, ahead of its earnings in later part of current week, gained over 3 percent while Tech Mahindra was up over 3.5 percent. TCS, L&T Technology Services and Wipro were other gainers.
The Indian rupee depreciated by 31 paise to trade at 5.32 against the US dollar, while the US dollar index, which measures the value of the US dollar relative to a basket of world's leading six currencies, traded above 94 mark, up 0.18 percent.
Metals Rally On Rising Commodities Prices
The Nifty Metal index rallied nearly 4 percent after the base metals hit multi-year highs. Hindustan Copper, Vedanta, Nalco and Hindustan Zinc were top gainers among metals stocks, rising 12-13 percent. Hindalco Industries, JSW Steel, Tata Steel, NMDC and SAIL gained 2-5 percent.
"Commodity prices surged to fresh multi-year highs as market players chose to focus on supply issues and overlook the increasing challenges for global economy," said Ravindra Rao of Kotak Securities.
He further said industrial metals have witnessed a sharp rise last week as rising energy costs have forced producers to reduce operations.
Aluminium, the most energy-sensitive commodity, surged to fresh 2008 highs amid concerns that rising power issues may further impact Chinese output. Zinc price hit the highest level since 2007 following Nyrstar's announcement that it will cut production by up to 50 percent at its three European zinc smelters from Wednesday due to the soaring price of electricity (Reuters).
Other industrial metals also followed suit and moved higher with copper moving closer to the $10,000 per tonne level on the LME.
Banks Uptrend Continues
The Nifty Bank, which covers 12 leading banks, moved closer to 40,000 mark which was largely expected by experts. It was up 0.87 percent at 39,684.80. HDFC Bank numbers were largely in line and asset quality was robust for the quarter ended September 2021, but the stock corrected which could be due to run up before announcing earnings on last Saturday. Experts feel the stock seems to have priced in earnings.
After HDFC Bank earnings, other banks traded in the green today. Punjab National Bank led the pack with 8 percent gains. IDFC First Bank and RBL Bank gained over 3 percent each, while ICICI Bank, Yes Bank and Federal Bank ahead of their earnings later this week climbed 2.2 percent, 5.7 percent and 2 percent, respectively.
Bandhan Bank, AU Small Finance Bank, Axis Bank, SBI and IndusInd Bank were other gainers.
"HDFC Bank numbers declared last Saturday showed 15.5 percent growth in credit disbursals and indicate sharp pick-up in credit growth in the festival season. Bank Nifty which has been an out-performer this month is likely to continue its uptrend," Vijayakumar said.
Buying in Reliance Industries
Oil-telecom-to-retail major Reliance Industries traded with more than Rs 18 lakh crore market capitalisation, ahead of its corporate earnings which is scheduled to be released on Friday. The company also announced several deals recently, with the respect to its solar energy segment, which experts feel could also be supporting the stock price.
The stock hit a fresh record high of Rs 2,744.95 and ended with 0.26 percent gains, while Reliance Industries' Partly Paid-up Shares gained 0.63 percent. Their combined market capitalisation stood at Rs 18,28,978.17 crore at today's high price.
Falling Covid cases amid rising vaccination, and FIIs data
Covid cases have consistently been falling for several weeks now, with active cases below 2 lakh mark for the first time in seven months following increasing vaccination pace across the country. Nearly 98 crore people are vaccinated in the country now including 29 percent people who are fully vaccinated. Health Minister last week said India is going to cross 100 crore vaccination in current week.
Now some states and Union Territories are showing zero Covid cases (including Bihar, Dadra, Lakshadweep and the Andamans) as well as zero deaths, which may boost consumption demand in many segments.
"India is nearing 100 crore vaccination mark and zero Covid deaths in some states is now witnessing robust consumption demand in many segments," said Vijayakumar.
Nifty Consumption index was down 0.5 percent, but stocks like Maruti Suzuki and ITC gained more than 2 percent. Titan Company and Voltas were up over a percent each. However, Avenue Supermarts fell over 7 percent which experts feel could due to profit booking as it has run up a lot, more than doubled in last one year. Its September quarter numbers were strong.
FIIs were net buyers in last two days as they net bought more than Rs 2,500 crore worth of shares on October 13-14 which could be supported the bulls.
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