The benchmark equity indices Sensex and Nifty rebounded strongly on Monday, tracking firm global cues and renewed foreign fund inflows amid expectations of a US Federal Reserve rate cut this week. Prospects of a US-China trade deal and fresh foreign fund inflows also added to the markets' optimism.
The Sensex jumped 566.96 points or 0.67 percent to settle at 84,778.84. During the day, it surged 720.2 points or 0.85 percent to 84,932.08. The Nifty climbed 170.90 points or 0.66 percent to 25,966.05.
SBI Life Insurance Company, Reliance Industries, Tata Steel, Bharti Airtel and Tata Motors Passenger Vehicles were among the major gainers in the Nifty pack, rising up to 4 percent intraday.
Key factors behind market rise
1) Fed rate cut hopes: A softer-than-expected US inflation reading has strengthened prospects of the Fed going for rate cuts, making emerging markets more attractive for overseas investors. The Federal Open Market Committee begins its two-day meeting on October 28, and the policy decision will be announced a day later.
2) FII Buying: Foreign institutional investors were net buyers in the previous session, purchasing equities worth Rs 621.51 crore on October 24.
"The declining trend in FII selling which started in early October continues. FIIs turned buyers too in many days of October. Total FII selling through exchanges up to 25th October stood at a negligible Rs 3,363 crore," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He noted that narrowing valuation gaps with global markets, improving domestic earnings outlook, strong festive demand and positive indications on an India-US trade deal could support more inflows. However, he cautioned that any rally may be limited at higher levels due to potential profit booking.
3) Positive global cues: Across Asia, South Korea’s Kospi, Japan’s Nikkei 225, Shanghai’s SSE Composite and Hong Kong’s Hang Seng traded higher, tracking overnight gains on Wall Street. US markets hit fresh record highs after data showed easing price pressures, bolstering expectations of the Fed maintaining a supportive stance for the economy. Reports of progress in trade discussions between the US and China also aided sentiment.
Vinod Nair, Head of Research at Geojit Investments, noted "The domestic market witnessed a broad-based recovery owing to progress in the US-China trade talks."
On the technical front, Anand James, Chief Market Strategist at Geojit Financial Services, said the Nifty’s recent pattern points to an early upside attempt.
"Though Friday’s recovery was stalled near VWAP resistance, the formation of a morning star pattern raises prospects of a return to the upside trajectory aiming 26,186. However, if the initial upswing fails to clear the 25,940-26,000 barrier, downsides may resume aiming 25,590-25,400," he added.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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