Sensex, Nifty scale fresh record highs: 4 factors driving the market rally

NEW DELHI: Benchmark equity indices on Tuesday hit fresh life-time highs riding on gains in Asian and US markets. A temporary deal between the US and China buoyed market sentiment with indices having nearly 2 per cent since both the countries agreed on a deal.

Foreign investors have also turned bullish and have poured over Rs 800 crore into India equity markets.

BSE barometer Sensex was gained 370 points to hit a fresh record high of 41,308.61 while NSE flagship Nifty scaled a new lifetime high of 12,158.80.

In the 30-share pack Sensex, Tata Steel was the biggest gainer, up 4.39 per cent at Rs 439.55 while its peer Vedanta gained 3.77 per cent to Rs 152.75. Sun Pharma was the worst laggard, down 1.28 per cent at Rs 429.45.

Here are key factors driving today’s rally:

US-China trade deal
The preliminary deal between Washington and Beijing reached last week is still the major guiding force for the market. Traders took a sigh of relief after a temporary relief on the 17-month old trade war between the two largest economies of the world.

However, there are still some concerns as it is not yet signed, and the Chinese side has been more circumspect in their praise, but US Trade Representative Robert Lighthizer said over the weekend it is “totally done”.

Moreover, Monday data showed growth in China’s industrial and retail sectors beat expectations in November.

$2.5 billion coming to India
India’s weightage in the MSCI Emerging Market index is set to rise as the Finance Minister on Friday confirmed implementation of the Budget announcement of increasing the statutory foreign portfolio investment limit in a company from 24 per cent to sectoral foreign investment limit effective April next year, said Morgan Stanley.

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“Using the current list of constituents, we expect MSCI India’s weight to rise by about 70 bps (basis points) in the semi-annual index review of May 2020, implying passive flows of US $2.5 billion,” said Morgan Stanley.

FII inflows
Foreign institutional investors (FIIs) started pouring money into Indian equities over the last couple of sessions after the air over Brexit and trade deal cleared. Following the removal of these overhangs, FIIs have invested net Rs 850 crore in equity segment, as per data available on the NSE. In December, however, FIIs have net withdrawals of Rs 3,000 crore.

In November, the FIIs have poured in Rs 12,924 crore into the domestic equity market.

Technical factor
Market appears to be reacting to the global development especially with regard to ‘trade deal’ as it negated the bearish formation registered in Monday’ session, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory,

“New highs shall augur well for the bulls provided index registers a close above 12,158. In such a scenario this upswing can get extended into the zone of 12,290–12,350, where critical resistance on long term charts is placed,” he said.

Mohammad said as market is heading into critical events, which are capable of influencing the market direction in the next two trading sessions, like GST meeting and Trump impeachment, traders are advised to book profits above 12,200 while riding the current upswing with a stop below 12,070.



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