Indian markets today edged higher for a fifth consecutive session, marking their best week in over three months. The benchmark BSE Sensex closed up 0.71% at 38,024.32, ending the week 3.7% higher. The broader NSE Nifty advanced 0.74% to 11,426. The Sensex is now less than 1,000 points away from its all-time intraday high of 38,989, hit earlier on 29 August 2018. Banking stocks led the gains, with the sectoral index, Bank Nifty, hitting a fresh high, rising 1.6%. Also, the rupee also today extended gains to the fifth session, hitting a fresh six-month high.
Sensex, Nifty rally explained in 10 points
1) Including today’s gains, the Sensex is up around 6% so far this month, clocking around 2,150-point gain in just 10 sessions. Midcap and smallcap stocks have also logged strong gains during this period.
2) Jayant Manglik, president of retail distribution at Religare Broking, said: “We're seeing a pre-election rally in anticipation of a stable government. The recent bargain hunting in the midcap and smallcap space has further strengthened the move," he said. Some opinion polls give an edge to the NDA government in the seven-phase Lok Sabha elections that start from April 11.
3) Financials, which have a major weightage in benchmark indices like the Sensex and Nifty, have led this round of the rally. Bank Nifty, the banking sector index, is up 10% in just 10 sessions so far this month, hitting multiple highs this week. Many private sector lenders like ICICI Bank and HDFC Bank have also hit fresh highs.
4) Driving these gains is a strong inflow from foreign institutional investors. Hemang Jani, head of advisory at Sharekhan, said markets seems to be in a positive mood ahead of the 2019 general elections. "Foreign institutional investors (FIIs) have pumped in around ₹30,000 crore this year, which is a positive for equities," he said.
5) On a net basis, FIIs bought shares worth a net of ₹1,482.99 crore on Thursday, while domestic institutional investors (DIIs) were net sellers to the tune of ₹817.77 crore, provisional data available with the BSE showed.
6) Global concerns have also receded, with global central banks, including the US Federal Reserve, adopting a softer stance. The US Fed has indicated that it will be patient in raising rates going forward and is also willing to review at the balance sheet adjustment if required.
7) Markets are also anticipating a positive outcome of the US-China trade negotiations. "We're doing very well with the China talks," US President Donald Trump told reporters at the White House on Thursday.
8) Analysts are expecting another rate cut by the Reserve Bank of India in April even though retail inflation climbed in February to 2.57%, after easing to a downwardly revised 19-month low of 1.97% in January. Teresa John, economist at Nirmal Bang Institutional Equities, said: "I still think the RBI will go ahead and cut rates because anyway it (inflation) has been undershooting for a long time and you have seen a slowdown in growth overall, be it IIP numbers or the GDP."
9) Jayant Manglik of Religare Broking said: “We advise continuing with the "buy on dips" approach. The Nifty faces its next major hurdle at 11,525. Indications are still favourable from the private banking majors along with select heavyweights from other indices," he added.
10) Market observers are, however, keeping a close eye on crude oil prices, which have risen close to four-month highs amid production cuts led by OPEC and as US sanctions against Venezuela and Iran likely created a slight deficit in global supply in the first quarter of 2019.