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Nifty scales 18,300, Sensex summits 61,000: Five factors behind the rally –

Bulls kept on charging for the sixth consecutive session on October 14, despite some ups and downs in foreign funds flow, setting the stage perfect for celebrating the Dussehra.

The benchmark indices climbed consistently to newer highs everyday as a buying binge spread across sectors through the last few trading sessions.

The BSE Sensex decisively surpassed the 61,000 mark and the Nifty50 crossed 18,300 intraday for the first time, rising 296 points to 61,033 and climbing 108 points to 18,269.50 at 1:08pm Indian time.

“Since there are no known triggers for a sharp correction in the short run and the market momentum continues to be strong, the exuberant retail investors are likely to drive the markets further up even though seasoned investors are worried about excessive valuations,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Here are five factors that are driving the markets higher on Thursday:

IT Stocks in Demand 

The market got a major support from the buying in technology companies, which make the second highest weightage in the benchmark indices after banking and financials space. Strong earnings scorecard by technology companies Mindtree, Infosys and Wipro fuelled the rally in other IT stocks, indicating a continuity in healthy earnings momentum, though TCS earnings were a miss last week.

The Nifty IT index gained nearly 3 percent as midcap IT company Mindtree was the biggest gainer with 12 percent, followed by Wipro with 9 percent and Infosys with 1.5 percent gains. Among others, Mphasis, Coforge, L&T Technology Services, L&T Infotech, and Tech Mahindra gained 4-9 percent.

Infosys reported 6.3 percent sequential growth in revenue in constant currency terms with deal wins at $2.15 billion, while Wipro showed a 8.1 percent QoQ growth in IT services revenue in constant currency. Mindtree delivered another excellent quarter with 12.8 percent growth in dollar revenue with deal wins at $360 million. Earnings of all were driven by broad-based growth, though high attrition rates were a challenge for the sector.

Uptrend in HDFC Bank

HDFC Bank gained momentum, hitting a record high of Rs 1,664 on Thursday ahead of its September quarter earnings. The private sector lender will announce its quarterly numbers on October 16.

The stock rose 1.5 percent at the time of publishing this copy. It rallied more than 17 percent in last two-and-a-half months and was one of the supportive factors for the market.

HDFC Bank on October 4 said its advances approximately at Rs 11.98 lakh crore as of September 2021 grew by 15.4 percent year-on-year and 4.4 percent on sequential basis.

As per the bank’s internal business classification, retail loans grew by 13 percent over the September quarter last year and around 5.5 percent over the June quarter this year, while commercial and rural banking loans grew around 27.5 percent YoY and 7.5 percent QoQ.

“Deposits at approximately Rs 14.06 lakh crore as of September 2021, grew 14.4 percent YoY, and 4.5 percent QoQ,” said HDFC Bank.

FOMC Minutes

The market seems to be less worried by the Federal Reserve Chair Jerome Powell commentary after the releasing of FOMC minutes on Wednesday, as there will be a gradual tapering in US bond purchases, though Powell highlighted a risk of inflation, which is a known event for the market.

European markets – France’s CAC, Germany’s DAX, and Britain’s FTSE – gained more than half a percent each after digesting inflation data and corporate earnings, while majority of Asian markets traded higher with Japan’s Nikkei and South Korea’s Kospi gaining half a percent each, and Australia’s ASX 200 rising half a percent. China’s Shanghai Composite was flat with a negative bias at the time of publishing this copy.

Retail Flow Continues

At the time of volatility in FII flow, retail investors continued to pour money into the stock markets, which is one of the key factors behind this rally. In September, the total inflow through systematic investment plans crossed Rs 10,000 crore for the first time in a month to reach Rs 10,351 crore.

“Interest to allocate in Indian equities continue, net sales is broadly positive in all categories of funds essentially in Multicap and Flexicap Funds. In addition to regular flows and incremental SIP inflows, new fund offers also have been creating a lot of interest among investors. It is also very encouraging to see much better inflows in dynamic/balance advantage funds as in current times of rising markets and premium valuations, this category of funds will allow to control risk of investors much more efficiently,” said Akhil Chaturvedi, Head of Sales and Distribution at Motilal Oswal Asset Management Company.

In October so far, FIIs were net sellers in equities to the tune of Rs 4,200 crore against Rs 914 crore of buying in previous month, while DIIs net bought Rs 1,300 crore worth of shares against Rs 5,950 crore of buying in previous month.

Mutual funds remained net buyers in equities at Rs 4,787 crore in September and in October so far, they have bought Rs 1,800 crore worth of shares till October 7.

Broader Markets and Other Sectors, Technical View

The momentum continued in broader markets, outperforming benchmarks by a wide margin. The Nifty Midcap 100 index was up 0.9 percent and Smallcap 100 index rose 0.8 percent on Thursday at the time of publishing this copy, while in current year 2021, they gained 55 percent and 63 percent respectively against 30 percent gains for the Nifty50.

Apart from IT, Metal, PSU Bank and Realty were other leading gainers, rising more than one percent each, while FMCG index was up 0.8 percent.

Technically, the Nifty50 finally surpassed 18,300 mark, but formed Doji kind of pattern on the daily charts, indicating indecisiveness among bulls and bears about further trend.

“We believe markets may continue this bull run till 18,400-18,500 levels. Immediate support and resistance in the Nifty50 are 18,000 and 18,400 respectively,” said Mohit Nigam, Head – PMS at Hem Securities.