Moneycontrol
Last Updated : Mar 12, 2018 03:12 PM IST | Source: Moneycontrol.com

Sensex, Nifty on strong footing, up 1%: 5 factors why the market surged today

Barring PSU banks, all sectoral indices were higher, while midcaps too traded with gains of around 0.30 percent.

Moneycontrol News @moneycontrolcom

The market has begun the week on a strong note, as benchmark indices rise over 1 percent, backed by strong global cues as well as some factors back home.

The Sensex rose over 500 points intraday, while the Nifty also surged over 100 points to trade comfortably above 10,300.

Barring PSU banks, all sectoral indices were higher, while midcaps too traded with gains of around 0.30 percent.

Moneycontrol takes a look at what are the key reasons behind the market’s upmove.

Import tariffs

Although the market all through last week fell on the back of import tariffs and the protectionist policies in the US, the Street may be slowly starting to digest this newsflow by now.

The Street is likely to have factored in this development and fallen to this extent.

US President Donald Trump last week announced that it was imposing a hefty 25 per cent import tariff on steel and 10 per cent on aluminium, a move which America's top trading partners said would attract retaliation.

Trump's plan for stiff and sweeping steel and aluminium import tariffs would face retaliation from America's top trading partners, the European Union and China.

More than 100 Republican lawmakers implored President Trump to drop his plan and urged him to focus on unfair trading policies of China.

Global Cues

The market could be mirroring the performance by Asian markets back home as well.

Asian stocks got off to a strong start to the week, with regional markets closing higher on Monday. Those gains came after stock indexes stateside surged in the last session on expectation-topping U.S. jobs data.

In Tokyo, the Nikkei 225 closed up 1.65 percent, or 354.83 points, to close at 21,824.03 after recording a more than 400-point gain earlier in the session. The broader Topix rose 1.51 percent, with gains seen across all of the index's 33 sectors despite developments related to a possible cronyism scandal in the country.

Technical factors

After trading all through last week on a negative note, technical experts had cited that the bounceback was possible due to the extent of fall as well.

Experts believe that the bounce back which could take the Nifty towards 10300-10400 levels. But, that would just be a ‘Dead Cat Bounce’ as the pain is not yet over.

“For a positional trader, it is always a prudent strategy to remain with the trend when it is in the early stages. The near-term trend turned lower after confirming the ‘Bearish

Engulfing’ pattern at the end of the ‘Budget week’,” Sameet Chavan- Chief Analyst, Technicals and Derivatives at Angel Broking

Addition to this, the ‘RSI-Smoothened’ slipped below the 70 mark and now we can see prices closing below the ’20-EMA’ on the weekly time frame for the first time after January 2017.

“We would continue with our ‘sell on rise’ approach and would expect the index to the first slide towards 10033 and then eventually to enter sub-10000 levels quite soon. However, before this, 10140 – 10350 has become a no-trade zone for the market. If any negativity has to resume, it would only happen after violating the 10140 mark,” said Chavan.

Oversold Market

One of the reasons for this bounce back could be the extent of fall in the market so far. For the calendar year 2018, benchmark indices have given negative returns and even in the month of March so far, it has largely managed to have remained oversold. As of Friday, 7 out of the 8 sessions on the indices have managed to end in the red, reflecting the extent of negativity in the market.

Experts had attributed these on the back of ongoing scams and the interest rate scenario in the US as well.

But, beyond a point of fall, the market could have started to look attractive, and investors could have rushed to cover their shorts as well. This move may have lead to the surge in markets on Monday.

FMCG, auto stocks rise

Strong trades in stocks such as ITC, HDFC Bank, Reliance Industries and Infosys, among others also contributed to the upmove in the market. For instance, the Nifty FMCG index is up over 2 percent, largely because of gains in cigarette and tobacco stocks such as ITC.

The stock has gained over 4 percent intraday on the back of no taxation change in the recently concluded GST council meeting.

Additionally, automobile stocks too reacted to positive data for February coming in. The Society of Indian Automobile Manufacturers (SIAM) released The market has begun the week on a strong note, as benchmark indices rise over 1 percent, backed by strong global cues as well as some factors back home.

 
First Published on Mar 12, 2018 02:51 pm
Loading...
Sections
Follow us on
Available On
PCI DSS Compliant