Undermining weak cues from Asian peers, the Indian benchmark equity indices BSE Sensex and NSE Nifty started the week on strong note as Dalal-Street investors gave thumbs-up to relief package announced by the government on Friday. The market sentiments were also lifted by hopes of possible resumption in trade talks between the United States and China coupled with drop in crude oil prices.
“The strongest message to the market was that government is concerned about the slowing economy and intends to support the situation with corrective measures. The initial set of actions, though small, has enhanced market’s sentiment and confidence to grab further sops for industries like housing & others. Market will trade in a positive bias awaiting further development regarding additional measures and US-China trade talk,” Vinod Nair, Head of Research, Geojit Financial Services, said.
The equity market witnessed surge in buying, with Sensex gaining as much as 792.96 points or 2.16 per cent to close Monday’s trade at 37,494.12, while Nifty settled 228.5 points, or 2.11 per cent, higher at 11,057.85. Of 30 Sensex stocks, 22 ended in the green, while 8 settled in negative terrain. All BSE sectoral indices, barring metal, ended in the green, with rate-sensitive realty and financial shares emerging as top gainers.
Here are the seven factors that propelled the rally in Indian stock market:
FPIs, domestic investors
Finance Minister Nirmala Sitharaman on August 23 announced a slew of measures to revive investor sentiment. The stimulus package included withdrawal of the tax surcharge on long and short-term capital gains on FPIs and domestic investors, removal of CSR violation as a criminal offence, among other steps.
Bank stocks
The market rally was supported by strong gain in rate-sensitive bank stocks, including HDFC Bank, HDFC, Yes Bank, ICICI Bank and State Bank of India. The banking stocks was boosted by the finance minister’s decision to immediately release Rs 70,000 crore to public sector banks.
Sops for realty stocks
Realty stocks also saw a surge in buying after Sitharaman said that banks have agreed to pass on the benefits of repo rate cut to its customers. Working capital loans for industry is also supposed to become cheaper.
Easing US-China trade war
The report of easing trade tension between the US and China also gave a boost to investor sentiment. US President Donald Trump claimed on Monday that the two sides will begin serious negotiations soon. Tracking the news, S&P 500 futures were trading higher, while European markets also traded in green despite a selloff in Asian shares. Stocks in Asia fell up to 3 per cent on Monday amid concerns about tariff hikes from both the United States and China.
RBI Board Meet
The Reserve Bank of India (RBI) Board held a meeting on Monday to discuss the recommendations of the Bimal Jalan Committee on Economic Capital Framework. The Economic Capital Framework report, which was submitted to RBI Governor Shaktikanta Das on Friday, has suggested that the RBI should transfer surplus cash reserves to the government in a phased manner over three-five years.
Also Read: RBI Board to meet today to discuss Jalan committee recommendations on surplus reserves
Drop in crude oil prices
Crude oil prices slipped on Monday as fear of escalating trade tensions between the US and China knocked confidence in the global economy. Earlier today, US crude touched its lowest level in more than two weeks after China said that US crude oil would be subject to new tariffs. Brent crude futures, the global oil benchmark, slipped 0.91 per cent to USD 58.80 per barrel, Reuters reported.
Technical factors
Nifty witnessed a sharp comeback today and closed the day on hefty gains.
“The short term trend of Nifty is positive and the market is now likely to head towards the key overhead resistance of 11,150 levels in the next few sessions (resistance as per change in polarity principle). This hurdle is going to be a crucial and decisive/sustainable move above this area could lead Nifty towards the next upside levels of 11,450-500 levels in the near term,” according to Nagaraj Shetti, Senior Technical and Derivative Analyst, HDFC securities.