Five factors that helped Sensex rebound nearly 400 points

Buying interest resumed in the benchmark indices as bulls regained control of Dalal Street on September 26, with the Sensex reclaiming 39,000 levels and Nifty 11,600 intraday, backed by uptrend across sectors.

The BSE Sensex jumped 396.22 points or 1.03 percent, to 38,989.74, and the Nifty50 rallied 131 points or 1.15 percent, to 11,571.20 after falling over a percent in the previous session.

But, the broader markets underperformed frontliners, with the Nifty Midcap and Smallcap indices gaining 0.9 and 0.6 percent respectively.

"We continue to believe that the recent policy announcements are structurally positive for equities and the scenario could improve post monthly derivative settlement and ahead of the much awaited RBI policy review meet next week," Gaurav Dua, Senior VP, Head – Capital Market Strategy & Investments, Sharekhan by BNP Paribas, said.

Here are the five factors driving the market:

Increased hope of a US-China trade deal

Investors’ mood lifted as hopes of a US-China trade agreement brightened after US President Donald Trump said a deal between the two countries “could happen sooner” than expected.

A deal will end the nearly 15-month-long trade war that is increasingly causing concern over global growth, including that of China. The encouraging comment pushed into the background concerns over political uncertainty in the US after the House of Representatives launched an impeachment inquiry against Tump.

On September 25, Trump and Japanese Prime Minister Shinzo Abe also signed a limited trade deal on that cuts tariffs on US farm goods, Japanese machine tools and other products while staving off the threat of higher US car duties.

More reforms coming

After Rs 1.45 lakh-crore fiscal stimulus, through the corporate tax cut, the government may be coming out with more measures to boost the economy and investor sentiment.

Speaking at the Bloomberg Global Business Forum in the US, Prime Minister Narendra Modi pitched India as 'the' investment destination for global investors, saying reforms by his government were just the beginning of a long innings.

His government would not shy away from taking big steps to improve the business environment. "Today India has a government that respects businesses and wealth creators," he said.

Analysts expect the government to work on increasing FDIs/FPIs and privatisation of some PSUs in the coming days.

Sources have told CNBC-TV18 that the government was planning a strategic stake sale in top five central public sector enterprises (CPSEs) and would seek the cabinet's nod for BPCL, CONCOR and SCI sales.

The government was looking to sell the entire shareholding in the companies mentioned above.

Fall in oil prices

Crude oil prices fell for the second consecutive session on September 26 after an unexpected increase in US crude inventories and a likely fall in demand amid Trump’s statement on trade deal with China.

Benchmark Brent crude futures traded at around $62.45 a barrel, falling from around $65 a barrel in two straight sessions. The rally in dollar after the news of presidential impeachment inquiry also put pressure on oil prices.

Any fall in oil prices is always good for a country like India, which meets 85 percent of its requirement through imports.

F&O expiry

The sentiment may have also improved on the settlement of derivative contracts as the market gained 5 percent in September series, and after a big fiscal measures. Hence, there is a huge demand for banking & financials and auto stocks, which were beaten down in the previous session.

Analysts largely expect a revival of demand for auto companies, an improvement in asset quality of banks and an increase in credit flow in the coming months.

The Nifty Bank, Financial Service, Auto, Metal and Realty climbed 1-4 percent.

Technical view

The Nifty reclaimed 11,600 levels intraday and formed a bullish candle on the daily charts, following a bearish belt hold kind of formation in the previous session.

Experts say the index is likely to see a strong hurdle at around 11,600-11,650 and if it breaches that, then there could be a massive rally towards 11,800-11,900 in the coming sessions.

"Despite the recent indecisive set-up, the view will remain positive as its key technical indicator were positively poised above their averages and signal strength at current set up. The 100-day simple moving average is currently pegged near 11,400, which will act as a crucial support in the coming days," Rohan Patil, Technical Research Analyst, Bonanza Portfolio, told Moneycontrol.

"A stable move above its mid-July high (placed at 11,707 level) will bring back the exuberance of climbing higher levels back in the trade. In case of a breakout, the index will face hurdle around its psychological level of 12,000," he said.

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