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Business News/ Markets / Stock Markets/  Nifty 50 hits all-time high. Why is Indian stock market gaining today - explained
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Nifty 50 hits all-time high. Why is Indian stock market gaining today - explained

The Nifty 50 hit its fresh record high of 21,928.25 during the session on Friday and closed at 21,894.55, jumping 247 points, or 1.14 per cent.

The Nifty 50 hit its fresh record high of 21,928.25 on Friday. (AP Photo/Rajesh Nirgude) (AP)Premium
The Nifty 50 hit its fresh record high of 21,928.25 on Friday. (AP Photo/Rajesh Nirgude) (AP)

Domestic equity benchmarks the Nifty 50 and the Sensex rose over one per cent to hit their all-time high on Friday, January 12.

The Sensex hit its fresh all-time high of 72,720.96 during the session before closing the day with a robust gain of 847 points, or 1.18 per cent, at 72,568.45.

The Nifty 50 hit its fresh record high of 21,928.25 during the session and closed at 21,894.55, jumping 247 points, or 1.14 per cent.

With this, both indices settled at their fresh closing peaks.

BSE Midcap index hit its fresh record high of 37,941.29 during the session. The midcap index closed at 37,875.43, up 0.36 per cent. The BSE Smallcap index closed at 44,503.70, with a gain of 0.41 per cent, after hitting its fresh all-time high of 44,644.04 during the session.

Also Read: Stock market today: Nifty50 ends the day at a record high near 21,900; investors earn nearly 3 lakh crore

Here are four key factors that appear to have led the Nifty 50 and Sensex to its fresh all-time high:

1. Robust gains in IT stocks

Most IT stocks jumped to strong gains after the December quarter earnings of TCS and Infosys.

The Nifty IT index jumped over 5 per cent to hit its fresh 52-week high of 36,482.25 in morning trade. Shares of Infosys and TCS clocked robust gains after the December quarter earnings.

Infosys reported a consolidated net profit of 6,106 crore, which declined over 7 per cent from 6,586 crore in the year-ago period. Its consolidated revenue could just grow1.3 per cent to 38,821 crore versus 38,318 crore in the same period last year.

TCS reported consolidated revenue of 60,583 crore for the quarter ending in December, marking 4 per cent YoY growth. Sequentially, TCS saw a 1.5 per cent increase in revenue. In constant currency terms (CC), the revenue grew by 1.7 per cent YoY.

Deepak Jasani, Head of Retail Research, HDFC Securities observed that the Nifty 50 made a new high as the IT stocks rose on relief after Infosys and TCS Q3 results.

"IT companies have reported results that show the effect of cost management and the fact that the long-term growth trajectory remains intact or has started to improve. Apart from IT stocks, Reliance and Jio Financial, Banks (including PSU banks) are seeing a lot of activity. Nifty needs to close above 21,850 today as it has not been able to do that for the past two weeks. The advance decline ratio is sufficiently positive suggesting the broad market remains strong. Cash market volumes are higher as is usual on such a large results day," said Jasani.

Also Read: TCS vs Infosys: 5 most important comparisons you should know

2. Expectations of a healthy Q3 earnings

Experts pointed out that the market sentiment remains bullish on expectations of robust December quarter earnings. Initial expectations for subdued earnings in the IT sector were surpassed by TCS and Infosys, surpassing projections and raising optimism that other sectors may also unveil stronger results for the quarter.

"The Nifty 50 has risen at a CAGR of 14.6 per cent over the last decade. A new high is an outcome of rising investors’ interest on the back of expectations of strong corporate earnings growth and foreign money flows," said Shrey Jain, Founder and CEO of SAS Online.

"Fear of correction should not be the reason to avoid investments. Historically, corrections have offered the best opportunities to pick fundamentally strong stocks at fair valuations. Ongoing quarterly results season should set the tone for the movements in individual stock prices," said Jain.

3. Undertone remains positive

Market sentiment has been positive on expectations of rate cuts by the US Fed and the RBI in the first half of 2024. Besides, India's robust growth outlook is a vital factor which is keeping the market sentiment upbeat. 

Pankaj Pandey, Head of Research at ICICI Securities underscored that the market sentiment has been positive of late. Nifty 50 saw some consolidations in the last few sessions but that has come as an opportunity to buy quality stocks.

Pandey expects the Nifty 50 to move higher by another 500 points to reach near the level of 22,300 in January.

4. Technical factors

Brokerage firm ICICI Direct observed that Nifty 50 is undergoing a slower pace of retracement as over the past ten sessions it merely retraced 38.2 per cent of the preceding five sessions' up move (20,977-21,801).

The shallow retracement followed by elongated rallies above the short-term average signifies inherent strength.

"We believe ongoing breather after past two months spectacular up move (16 per cent) would make the market healthy and pave the way for the next leg of up move as strong support is placed at 21300. Thus, extended breather should not be construed as negative instead focus should be on constructing quality stock portfolios at lower levels," said ICICI Direct.

"The formation of higher peak and trough backed by sectoral rotation makes us confident to retain support base at 21,300 as it is the confluence of 61.8 per cent retracement of recent up move (20,977-21,834), 20-day exponential moving average (EMA) placed at 21,297, and the past two week’s low of 21,329," the brokerage firm added.

Deven Mehata, an equity research analyst at Choice Broking pointed out that the Nifty 50 maintains a robust support base at the 21,450 level, closely aligned with its 20-day exponential moving average (EMA).

Mehata observed that Nifty trades above crucial moving averages, underscoring its inherent strength. Following a temporary cool down, the momentum indicator RSI has resumed its upward trajectory, currently hovering at 69 levels.

"A recent breakout from the established range, propelling the index to an all-time high, underscores the robust momentum in the market. Positive quarterly results from Nifty leaders like Infosys and TCS, surpassing market expectations, have played a pivotal role in elevating the index. Any retracement in the index presents a potential buying opportunity, with a stringent stop loss set at 21,450 to manage risk effectively," said Mehata.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 12 Jan 2024, 11:09 AM IST
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