Bulls commanded Dalal Street on March 1 pushing benchmark indices Nifty and Sensex over 1.5 percent higher as investors cheered faster-than-expected domestic economic growth and in-line U.S. inflation data. The positive cues from the global markets also fuelled the rally, pushing Nifty closer to its all-time high.
At 2:07 pm, the Sensex was up 1,123.55 points or 1.55 percent at 73,624, and the Nifty was up 336.40 points or 1.53 percent at 22,319. About 2,184 shares advanced, 1,076 declined, and 78 were unchanged.
Sectorally, Nifty Metal led the gains, rising over 2 percent. It was followed by Nifty Auto, Bank, Energy and Infra which jumped up to 1.8 percent. Meanwhile, Nifty Media led the losses, falling over 1 percent. Nifty IT and Pharma were also trading in the red.
Here's what fuelling the rally
1. Better-than-expected GDP print
Indian economy grew 8.4 percent in the October-December quarter, the fastest pace in six quarters and above estimates, supported by robust manufacturing and construction activity.
"The main factor influencing the market today is likely the better-than-expected Q3 GDP growth number which has come at an impressive 8.4 percent. The impressive GDP numbers provide the fundamental support to the bull market," said said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
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2. Elevated valuations supported
The GDP data might be supportive of valuations, according to Deepak Jasani, Head of Retail Research, HDFC Securities, told Moneycontrol. “Valuations-wise, we have been at a high level for a few months now,” he said. Nifty is trading at a P/E of 23.45. At these levels, the markets have likely already baked in the current economic growth.
“Already, fairly high growth is being factored in the current valuations and the better-than-expected GDP numbers is endorsing the growth. This makes the case for valuations to remain in the current buoyant zone,” said Pawan Bharadia, managing director at Equitree PMS.
3. Upbeat global markets
Positive global cues also helped indices move higher. Wall Street stock closed in the green overnight, with S&P 500 and Nasdaq Composite settling at record highs after in-line U.S. inflation reading kept intact the likelihood of a June interest rate cut.
Meanwhile in Asia, Japan's Nikkei hit a fresh record high, buoyed by the bounce on Wall Street. China’s CSI 300 rose 0.2 percent after factory data and Hong Kong’s Hang Seng index also edged higher.
4. Encouraging US inflation data
The in-line U.S. inflation reading also aided market sentiment as it kept intact the likelihood of a rate cut in June by the Federal Reserve. Rate cuts mean more liquidity in the market and a possibility of the Fed reducing rates soon as boosted positivity among participants.
5. FIIs in buying mode
Foreign investors net bought shares worth Rs 3,568 crore in the previous session, while domestic institutional investors sold shares worth Rs 230 crore. In the month gone by, they bought Indian equities worth Rs 5,107 crore, after pulling over Rs 25,000 crore out of the domestic market. In the past decade, FIIs have turned out to be buyers of domestic stocks in March on eight occasions.
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