Sensex jumps 500 pts, Nifty above 24,500: Sharp fall in crude, other key factors behind market rally

Sensex, Nifty surged on Monday amid sustained foreign fund inflows and positive global cues .

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The equity benchmark indices Sensex and Nifty surged in early trade on Monday amid sustained foreign fund inflows and a sharp drop in crude oil prices. Firm trends in the US markets also led to the positive momentum in the domestic markets.

The Sensex climbed 507.65 points or 0.63 percent to an intraday high of 81,009.64 in early trade, while the NSE Nifty surged 164.6 points or 0.67 percent to a high of 24,511.30.

Adani Ports, Asian Paints, Bajaj Finserv, Tata Consultancy Services, Infosys, HDFC Bank, Power Grid, HCL Tech, Titan and Tata Motors were among the major gainers in Monday's trading session.

Here are the key factors behind the market rise today:

1) Consistent FII buying: Foreign Institutional Investors (FIIs) bought equities worth Rs 2,769.81 crore on Friday. Foreign investors injected Rs 4,223 crore in the country's equity market in April as they turned net buyers for the first time in three months amid favourable global cues and robust domestic fundamentals. The inflow of foreign capital came last month following a back-to-back net outflow of Rs 3,973 crore in March, Rs 34,574 crore in February, and Rs 78,027 crore in January.

"The reversal in FII strategy in India from selling to buying continued for the week ending 2nd May. During the last 12 trading days FIIs have been sustained buyers in the cash market. This is a major pivot in FII strategy. And this will impart resilience to the market. The steep decline in the dollar index from 111 on 11th January to 99 recently continues to be a strong tailwind for the market," V K Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, said.

2) Sharp fall in crude: Oil prices tumbled on concerns of a supply overload, after OPEC+ decided to increase its output, adding to supply at a time when demand is challenged by the drag from the trade war. Global benchmark Brent tumbled by as much as 4.6 percent toward $58 a barrel as the week’s trading kicked off, while West Texas Intermediate was near $56. India, which relies on imports for 85 percent of its crude needs, stands to gain from the price drop, as do industries that use crude derivatives. Lower crude prices translate to softer input costs for paint and tyre companies like Asian Paints, boosting gross margins and profitability.

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3) Positive global cues: On Friday, Wall Street extended its gains to a ninth straight day, the market’s longest winning streak since 2004. It has reclaiming much of the ground it lost after President Donald Trump escalated his trade war in early April. The rally was spurred by a better-than-expected report on the U.S. job market and revived hopes that Washington will tone down its trade tensions with China. The S&P 500 climbed 1.5% to 5,686.67. The Dow Jones Industrial Average added 1.4% to 41,317.43, and the Nasdaq composite rose 1.5% to 17,977.73. In Asian market, South Korea's Kospi index traded higher.

4) Indian Rupee Gains: The rupee gained 39 paise to 84.18 against the US dollar on Monday, as continued foreign investor interest in Indian assets lent fundamental support to the local unit. Forex traders said a sharp decline in crude oil prices and a positive trend in domestic equities enthused investors further. Brent crude oil prices slumped nearly 4 percent in the morning Asian trade after OPEC+ signalled over the weekend that they will further increase production in the coming months.

5) Buying in IT stocks: Heavy buying was seen in the IT shares ahead of the US fed meeting on Wednesday. Persistent Systems, Coforge, Tata Consultancy Services, LTIMindtree and Wipro were among the major gainers, rising up to 2 percent.

What technical analysts say? 

Anand James, Chief Market Strategist at Geojit Investments noted "Friday’s vicious rejection trades forced Nifty to form a gravestone doji candlestick pattern. However, the close near 24350 which is incidentally the same as that of each of the six previous days encourages us to the ignore the bearish signal from the doji for now, and stick with the 25000 views."

"That said, any sign of slipping below 24280 would have to be taken as an indication towards weakness, though it might require a confirmation from a break below 23850, to play a 23670-23460 plunge. The odds of the same appear low at this point though, but we remain cautious."

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.