Bulls back in action: Sensex rises nearly 750 pts, Nifty closes above 24,550; five key reasons behind market rally

Bulls back in action: Sensex rises nearly 750 pts, Nifty closes above 24,550; five key reasons behind market rally

Equity benchmarks Sensex and Nifty showed healthy signs of recovery on August 11 after posting longest weekly losing streak of six weeks until August 8, last seen during Covid-led crash in 2020. Sensex gloriously reclaimed 80,000-mark by rising nearly 750 points while Nifty closed trading above the psychologically important milestone of 24,550.

On August 11, Sensex closed 746.29 points or 0.93 percent higher at 80,604.08, and the Nifty ended 221.75 points or 0.91 percent higher at 24,585.05. About 2,136 shares advanced, 1,867 shares declined, and 161 shares were unchanged.

Here are the key factors behind market rally:

1) Value buying

After the equity markets posted losses for six straight weeks, partly due to the steep tariffs that US President Donald Trump has threatened to impose on India, value buying has emerged.

"Momentum is still skewed to the downside", said Santosh Meena, head of research at Swastika Investmart, referring to the uncertainty over the US trade negotiations.

"But the recent slide could trigger a technical rebound, though trade updates will ultimately call the shots," Meena told Reuters.

Trump imposed a 50% tariff on goods from India, half of which has already come into effect, while the additional 25%, a punitive tariff for buying Russian oil, will be effective from August 28.

"From a technical standpoint, the Nifty has now formed six consecutive red candles on the weekly chart — a rare and notable pattern that indicates sustained selling pressure. The index is approaching a key support zone of 24,200–24,000, which also aligns with the 100-day EMA on the daily chart. Any reversal near this zone could present a strong buying opportunity. On the upside, immediate resistance is placed at 24,590, and a decisive close above this level may open the path towards 25,000 and 25,250 in the short term," said Mandar Bhojane, Senior Technical & Derivative Analyst - Research at Choice Equity Broking Private Limited.

2) Positive global cues

Major share indexes crept higher in Asia on Monday as upbeat company earnings underpinned high valuations in the tech sector, while a crucial report on US inflation would likely set the course of the dollar and bonds.

While Japan's stock market was closed for a holiday, futures climbed to 42,465 and suggested the index will test its all-time high of 42,426 this week.

Trade and geopolitics loom large with a US tariff deadline on China due to expire on Tuesday amid expectations it will get extended again, while Trump and Russian leader Vladimir Putin are due to meet in Alaska on Friday to discuss Ukraine.

Wall Street futures were also trading marginally higher after US stocks ended higher on Friday, with the Dow adding nearly half a percent, the S&P 500 climbing more than three-quarters of a percent, and the Nasdaq gaining one percent to notch a record closing high for the second straight day.

Stocks on the move included Apple, which rose more than 4% Friday and was up over 13% for the week, it's biggest weekly percentage gain since 2020.

Also helping the S&P 500 were shares of Gilead Sciences, which jumped more than 8% after the biopharmaceutical company raised its full-year financial outlook.

3) Buying in SBI, Grasim shares

Gains in Grasim Industries and State Bank of India on upbeat quarterly earnings also contributed to the positive market momentum

Grasim Industries shares jumped 2.6% after reporting better-than-expected earnings, with Jefferies and Morgan Stanley raising price targets citing strength in its chemicals business.

Public sectors bank stocks rose up to 4%, led by a 2.2% rise in State Bank of India.

The country's largest lender by assets posted a 12.5% year-on-year profit rise, driven by stronger non-lending income.

4) Oil prices fall

Oil prices fell in Asian trade on Monday, extending declines of more than 4% last week as investors awaited the outcome of talks between the US and Russia later this week on the war in Ukraine.

Brent crude futures fell 33 cents, or 0.5%, to $66.26 a barrel by 0430 GMT, while U.S. West Texas Intermediate crude futures were down 39 cents at $63.49.

Expectations have risen for a potential end to sanctions that have limited the supply of Russian oil to international markets, after Trump said on Friday that he would meet Russian President Vladimir Putin on August 15 in Alaska to negotiate an end to the war in Ukraine.

5) Solid AMFI data

The net inflow into equity mutual funds surged 81% to Rs 42,672 crore in July, data released by the Association of Mutual Funds in India (AMFI) showed on August 11.

Also, the latest fund infusion by investors marks the 53rd consecutive month of net inflows into the segment.

The data suggests that retail investors are optimistic about the markets despite the equities falling for the sixth straight week.

Expert Speak

Geopolitical developments will be influencing the market trend this holiday-truncated week, said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

"Geopolitical developments will be influencing the market trend this week more than other factors. The market will be focussed on the outcome of the Trump-Putin talks in Alaska. If the talks result in an end to the Russia-Ukraine war, that would be a major positive development. US sanctions on Russia may be withdrawn and consequently the penal tariff of 25% imposed on India for buying oil from Russia also may be reconsidered. If this happens the oversold market will stage a smart rebound. Investors will have to wait and watch for the developments.

"India has been underperforming other markets significantly in the last six weeks. Nifty is down 7.6% from the September 2024 record high. Even though a sharp short-covering rally may happen on positive news, sustained rally will happen only fundamental support on the earnings front. This can happen from Q3 onwards. Now, safety is in fairly-valued largecaps," he said.

With inputs from Reuters