The benchmark indices extended rally for the second consecutive session on April 8, with the Nifty50 reclaiming psychologically important 9,000-mark for the first time after March 17, 2020 in the morning trade.
The BSE Sensex was holding 30,000 levels, rising 705.59 points or 2.35 percent to trade at 30,772.80 at the time of writing this copy.
The Nifty50 also rallied 207.70 points or 2.36 percent to 8,999.90, while the broader markets outperformed frontliners with the Nifty Midcap and Smallcap indices rising more than 3 percent each.
Here are five factors driving the market higher:
Stimulus hope
Most experts are of the view that the government may come out with stimulus measures for industries before the end of 21-day lockdown on April 14. This could be one of reasons for market rally.
“We can expect more measures coming from both the government and RBI in the near future. The fiscal measures taken by the government are aimed at food and income security for the bottom of the pyramid population. It does not however address the cash flow problems of MSMEs and to that extent they will require support, especially, in case of an extended lockdown. We see space for additional fiscal spending of around Rs 1 trillion,” said Rusmik Oza, Executive Vice President, Head of Fundamental Research, Kotak Securities.
Oza said after 75bp cut in repo rate and 100bp in cash reserve ratio, the RBI can further reduce repo rates by 50 bps, given a moderating inflation trajectory.
Hopes of decline in coronavirus infections
Investors are hoping that the new cases of coronavirus infections and deaths will see some decline in Europe and in some parts of United States, which also could be the reason of sharp fall in global volatility in recent days.
In India, too, India VIX dropped to 53 levels from 86 mark in two weeks. The recent equity data indicates that the globally markets have not seen as sharp a decline in the past few sessions as was being seen till March 23, when the Indian benchmark indices posted biggest ever single day fall.
Globally, coronavirus cases have crossed 1.4 million with more than 81,000 deaths worldwide as per the data compiled by Johns Hopkins University.
China has ended the lockdown in Wuhan, where the first case was reported, while Australia’s parliament is expected to pass a $130-billion stimulus package. Japan has already declared an emergency and approved a $1-trillion package to ease the economic pain.
After previous day’s rally, Asian markets were mixed in trade, with Japan’s Nikkei rising more than 2 percent, Australia’s ASX 200 and South Korea’s Kospi gaining more than half a percent. However, China’s Shanghai Composite and Hong Kong’s Hang Seng were marginally lower.
Dow Jones futures traded more than 300 points higher, indicating positive opening on Wall Street later on April 8.
Rally across sectors
The rally continued across sectors, with the Nifty Bank gaining 4 percent on top of 10.5 percent rally seen in the previous session.
The Nifty Financial Service index was also up 4 percent while auto climbed nearly 5 percent. Nifty FMCG and Metal gained more than 3 percent each.
Defensives like IT (up 1.3 percent) and pharma (up 4 percent) also gained further strength. The government’s decision to supply of ingredients for medicines required to fight coronavirus in the US and other nations also lifted sentiment.
The rally indicated that there could be value buying as well as short covering
FII buying
The buying by foreign institutional investors also aided sentiment, which indicated that FIIs could be pouring money in quality stocks due to attractive valuations.
FIIs bought Rs 741.77 crore worth of shares on April 7, when the benchmark indices registered biggest-ever single-day gains, after selling more than Rs 10,000 crore worth of shares in previous four sessions.
Technical view
The Nifty50 rallied to reclaim 9,000 mark and formed bullish candle on daily charts.
Experts feel the index may continue to face resistance around 9,000 and if it holds the level in coming days, the rally could be extended to 9,400-9,500.
“The next path of action would be decided how the bulls tackles 9,000-9,050 resistance. Looking at yesterday’s sharp broad based move, we will not be surprised to see the Nifty surpassing it and then marching towards 9,200-9,400 levels. On the flipside, 8,550-8,360 now becomes a sacrosanct support for a while,” Sameet Chavan, Chief Analyst-Technical and Derivatives at Angel Broking, said.
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