Equity benchmark indices crossed psychological levels with the Sensex trading above 38,000 and the Nifty above 11,500
The market continued its recovery for the second consecutive session on Friday, with the Sensex rising more than 400 points intraday on short covering as well as value buying ahead of economy review meeting.
Equity benchmark indices crossed psychological levels with the Sensex trading above 38,000 and the Nifty above 11,500, driven by rally across the board barring IT.
The 30-share BSE Sensex ended 372.68 points or 0.99 percent higher at 38,090.64 and the 50-share NSE Nifty jumped 145.30 points or 1.28 percent to 11,515.20.
The Nifty Bank, Auto, Metal, Pharma and Realty indices gained between 1 percent and 3 percent while the broader markets also participated in the up move with the Nifty Midcap index rising over 1.5 percent.
Experts remained optimistic about India as a long-term story, citing improving fundamentals and earnings performance.
"We expect 18-20 percent earnings growth for FY19 and Q1 numbers already indicated positive sentiment that earnings recovery is on cards and subsequently we expect 15-18 percent growth for FY20," Ratnesh Kumar, MD & CEO, BOB Capital Markets said.
With next 12-15 months perspective, he believes the market can be higher by 16-17 percent from now if earnings growth happens on expected lines.
Global investment firm Morgan Stanley has also raised its 30-share BSE Sensex target to 42,000 for September 2019, implying a potential upside of 11 percent.
Here are top five factors driving the sentiment:
PM's Economy Review
Prime Minister Narendra Modi is expected to meet top government officials including the Finance Secretary Hasmukh Adhia and members from his economic advisory council on Saturday to review the current economic scenario.
Along with a team of bureaucrats and economists, Modi may work out a strategy to bolster market’s confidence and improve the macroeconomic scenario.
Despite robust GDP growth and falling inflation, India is facing the threat of a widening twin deficit — current account and fiscal deficit — led by a clamour for an excise duty cut on fuel as falling value of rupee against dollar has made petrol diesel more expensive for the common man.
Weakening domestic currency against dollar has hardened benchmark bond yields that have surged their highest in four years. The fall in rupee has also escalated import bill and depleted forex reserves to some extent.
The Indian rupee recovered against the US dollar for second consecutive session, especially on hope of measures which are likely to be considered in economic review meeting on Saturday and also stability in emerging market currencies after Turkey's central bank move.
The rupee gained Rs 1.39 in two sessions to hit an intraday high of 71.52 a dollar, though erased some gains to trade around 71.83 a dollar, up 35 paise from Wednesday's close (at 15:30 hours IST).
On September 12, rupee plunged to a record low of 72.91 against the dollar but recovered around to close at 72.19.
The rupee has fallen more than 13 percent this year, making it the worst performing Asian currency. Investors have been pulling out of emerging markets, betting on a stronger US economy.
Higher crude oil prices as well as concerns over an escalating global trade war triggered by the US and China’s retaliatory tariffs on goods imported from each other has had bearing on currencies across the world.
Asian currencies fell especially after Turkish Lira tumbled about 28 percent in August and 40 percent year to date after the US decided to double import tariffs on the country's steel and aluminium.
European markets traded higher with the France's CAC and Germany's DAX rising 0.37 percent each at the time of writing this article.
In a move to support falling lira, Turkey's central bank raised interest rates sharply by 625 basis points to 24 percent, which boosted sentiment and global risk appetite across equity markets and currencies. Currency crises in Turkey and Argentina have stoked fears of contagion in recent weeks, which had hit sentiment in emerging markets.
Turkish lira, Argentina peso ets gained against the US dollar.
Most Asian markets also ended higher with Japan's Nikkei, Hong Kong's Hang Seng and South Korea's Kospi rising over a percent each.
Globally, the investors closely watch trade developments as there are reports indicated that world's largest economies US and China could soon launch a fresh round of trade talks. The news of another potential meeting between Washington and Beijing comes amid an escalating trade war between the world's two largest economies.
Chinese officials welcomed a US invitation for talks, less than 24 hours after President Donald Trump tweet saying the US was "under no pressure to make a deal with China."
The Trump administration is expected to impose tariffs on $200 billion worth of Chinese goods soon. In addition, there were reports in early part of the week saying the US administration may be proposing to impose tariffs on another list of $267 billion worth of Chinese imports.
The Nifty50 surpassed near term target of 11,479 set by technical experts after Wednesday's rally. Now sentiment indicated that the index may cross 11,600 levels also if any strong PM announces any strong measures on Saturday.
"Based on wave counts on lower time frame charts it is clearly looks like a counter trend rally which if materialises should have a best case scenario target of 11,658 on the upside before resuming the downswing again," Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.Maximum Call open interest addition of 41.77 lakh contracts is at 11,800 strike, which has been the leading strike for couple of weeks, followed by 11,600 and 11,500 strikes while maximum put open interest of 46.93 lakh contracts was seen at the 11,400 strike price, followed by 11,000 and 11,500 strikes.