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Last Updated : Oct 09, 2019 05:19 PM IST | Source: Moneycontrol.com

Sensex gains 646 pts, Nifty ends above 11,300; 5 factors driving markets

The government has been active since the second half of August and continued to announce several measures to boost the slowing economy and get the demand back on track.

Sunil Shankar Matkar
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The market rebounded sharply after a steep fall in the last six sessions, with the Nifty50 reclaiming 11,300 levels despite waning optimism over US-China trade meeting that will be held on October 10-11.

The benchmark indices had fallen nearly 4 percent in the previous six days in a row, while BSE Smallcap index slipped 5.4 percent and Midcap index dropped 4.7 percent after rising 6-8 percent following the corporate tax rate cut.

The 30-share BSE Sensex was up 609.56 points or 1.62 percent at 38,141.54 and the Nifty50 rallied 177.10 points or 1.59 percent to 11,303.50 at the time of publishing this copy.

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The 30-share BSE Sensex was up 645.97 points or 1.72 percent at 38,177.95 and the Nifty50 rallied 186.90 points or 1.68 percent to 11,313.30.

The broader markets also traded higher but underperformed frontliners with the BSE Midcap index rising 1.38 percent and Smallcap index up 0.66 percent.

However, the market breadth was balanced as about 1,151 shares advanced against 1,132 declining shares on the BSE.

Asian markets ended mixed as hopes that the US and China could reach a truce this week faded after Donald Trump's administration introduced visa restrictions on Chinese officials and added more Chinese companies to a US trade blacklist.

US official said high-level trade talks would still take place on Thursday and Friday as planned, but Trump has said tariffs on Chinese imports will rise on October 15 if no progress is made in the negotiations.

Here are five factors that are driving the market:

Increase in Dearness Allowance

The government has been active since the second half of August and continued to announce several measures to boost the slowing economy and get the demand back on track.

While addressing a press conference after Cabinet meet today, I&B Minister Prakash Javdekar said the dearness allowance has been increased by 5 percent and the total expenses for government stood at Rs 16,000 crore.

About 50 lakh government employees and 62 lakh pensioners will benefit from the hike in dearness allowance to 17 percent from 12 percent earlier.

The government, so far, announced several measures for auto, exports, real estate, NBFCs, 10 percent cut in corporate tax rate etc.

Rally in Banking & Financials

The most beatendown stocks in banking & financials, auto, metals, realty etc in previous six consecutive days saw buying interest today, partly due to short covering.

Nifty Bank rallied 1,018 points or 3.67 percent while PSU Bank and Private Bank indices gained more than 3 percent each against a fall of 7.5 percent, 10.3 percent and 7.6 percent in the previous six straight sessions.

ICICI Bank, SBI, Bank of Baroda, Kotak Mahindra Bank, HDFC Bank, Axis Bank, RBL Bank, Federal Bank and PNB gained 1-5 percent. Nifty Financial Service index rose 3 percent.

The Nifty Auto, Metal, Pharma and Realty indices climbed 1-2 percent.

IndusInd Bank Rallies

Shares of IndusInd Bank gained nearly 6 percent on optimism ahead of second quarter earnings on October 10. Brokerage houses expect healthy earnings from the private sector lender.

Motilal Oswal expects more than 43 percent growth in September quarter profit, as well as, net interest income backed by 29 percent loan growth on Bharat Financial merger.

Margin is likely to expand to around 4.1 percent, driven by high-yielding book of Bharat Financial while non-interest income may grow around 30 percent YoY, but credit cost is expected to remain elevated on the back of higher slippages and increased provision on the stressed groups, the brokerage said.

Fall in Oil prices

Oil prices traded below $60 a barrel amid rising uncertainties for global economic growth and oil demand as tensions escalated between the world's largest economies - the United States and China ahead of their trade talks.

Brent crude futures traded around $58.41 a barrel, up 0.26 percent at the time of publishing this copy.

The price of international benchmark below $60 a barrel is favourable for India as it imports more than 85 percent of requirement.

Technical View

The Nifty formed bullish candle for the first time in last seven consecutive sessions following short covering in most beaten down stocks.

The index strongly scaled above crucial 11,200 levels and closed above 11,300 levels. If it holds above 11,200 on closing basis in coming sessions then there could be further rally, experts feel.

"Nifty took support from the line of parity and 50 DMA placed around 11,100 levels forming a big body bullish reversal candle. As per the candlestick pattern and a decisive close above previous day high suggests continued positive bias," Shabbir Kayyumi, Head of Technical Research, Narnolia Financial Advisors said.

"As long as Nifty is sustaining above 11,200 levels, it can move higher towards 100 DMA placed around 11,410 levels," he added.

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First Published on Oct 9, 2019 03:14 pm
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