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Last Updated : Aug 04, 2020 03:52 PM IST | Source: Moneycontrol.com

Nifty back to 11K, Sensex spikes 748 pts; these 5 factors supported the market rally

The broader markets also traded higher with the Nifty Midcap and Smallcap indices rising a percent each.

Sunil Shankar Matkar

The market gained momentum on August 4 with the Nifty50 hovering around 11,000 mark after witnessing correction in previous four consecutive sessions.

At close, the BSE Sensex rallied 748.31 points or 2.03 percent to 37,687.91 and the Nifty50 climbed 203.70 points or 1.87 percent to 11,095.30 despite rising coronavirus cases.

The broader markets also traded higher with the Nifty Midcap and Smallcap indices rising a percent each.


Here are five factors that could be driving the market higher:

Global Cues

Asian peers closed higher after the Reserve Bank of Australia (RBA) maintained its current policy settings. Also, Australia's retail sales data for June showed 2.7 percent growth compared to May.

Australia' ASX 200 gained 1.88 percent, while Japan's Nikkei climbed 1.7 percent. Hong Kong's Hang Seng was up 2 percent and South Korea's Kospi rose 1.3 percent.

HDFC Bank rallies

HDFC Bank, with 4 percent rally, was the key driver for the benchmark indices after the Reserve Bank of India approved the appointment of Sashidhar Jagdishan as Managing Director & CEO of the bank for a period of three years.

His appointment will be effective from the date of taking charge, i.e. October 27, 2020.

The bank said meeting of the Board of Directors would be convened in due course to approve the appointment of Sashidhar Jagdishan in place of Aditya Puri, who is due to retire as Managing Director of the bank on October 26, 2020.

Sashi joined the bank in 1996 and currently he is the Group Head of Finance, Human Resources, Legal & Secretarial, Administration, Infrastructure, Corporate Communications, Corporate Social Responsibility & the Strategic Change Agent of the bank.

HDFC and HDFC Life shares gained 2 percent each.

Short Covering as well as Value buying in heavyweights

Experts feel there could also be some short covering as well as value buying in beaten down strong stocks as the Nifty lost 400 points in previous four consecutive session after hitting the top of 11,300 levels for the first time since March this year.

"Although momentum has slowed down, stock specific action is still happening, dependent mainly on the earnings results and commentary. As long as the markets hold the current range, these downturns could be shortlived and should be utilized to accumulate quality stocks," Vinod Nair, Head of Research at Geojit Financial Services said.

Reliance Industries with 7 percent rally also led the market from front along with HDFC Bank. ICICI Bank, Bajaj Finance and Axis Bank gained 2-3 percent with Bank Nifty up 2 percent, while auto stocks after July sales data - Hero MotoCorp, Maruti Suzuki, Bajaj Auto, Eicher Motors, M&M - also lifted market sentiment - rose 1-3 percent.

Monetary Policy Committee Meeting began Today

The three-day Monetary Policy Committee meeting has kicked off today, which could be driving the market sentiment amid hope for more measures to support the economy.

Majority of experts feel the MPC members may cut repo rate by another 25 bps on Thursday in addition to 115 bps cut in previous two meetings.

"We expect the MPC to cut rates by 25bps. This is because: a) Growth remains weak, India's unlocking is slow and RBI's own prognosis indicates rising asset quality stress. Thus, growth revival should be policy priority, as is the case around the world. b) Headline inflation, while currently above RBI's projected trajectory, has probably peaked out. It should move towards 4 percent or below by December 2020. Also, RBI should look through the temporary spike in inflation as it is being driven by COVID-19-related supply disruption rather than strong pricing power/wages (which are actually worsening)," Edelweiss said.

Any additional monetary measures (operation twist, etc.) and regulatory policies for the financial sector would be keenly watched, the brokerage feels.

Technical View

The Nifty50 climbed over a percent and formed bullish candle on the daily charts so far after witnessing bearish candle formation in previous four straight sessions.

The bounce back was on expected lines but the index needs to decisively surpass 11,200 levels to bulls with strong strength, otherwise the consolidation may continue, experts feel.

"The Nifty remained positive for the entire trading session but I would still maintain a cautious stance. For any upside to trigger, we would need to go past 11,200 on a closing basis as that would be the confidence builder to reverse this short term weakness and enter back into the medium term positive trend," Manish Hathiramani, Proprietary Index Trader and Technical Analyst at Deen Dayal Investments told Moneycontrol.

Sameet Chavan, Chief Analyst-Technical and Derivatives at Angel Broking advised traders to avoid forming shorts at current zone as there are multiple supports seen.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Aug 4, 2020 12:26 pm