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Sensex zooms 900pts, Nifty shoots past 17,600: Five factors behind the rally –

Stock market,share market

The market entered the new year on a bullish momentum, with the benchmark indices hitting fresh two-week highs, as bulls remained strong in the second straight session on Monday.

The BSE Sensex climbed above the 59,000 mark, rising 900 points or 1.55 percent, to 59,154, while the Nifty50 surged 257 points or 1.5 percent to 17,611, at 2:22pm.

The broader markets also joined the rally, with the Nifty Midcap 100 and Smallcap 100 indices rising over 1 percent each.

Here are five factors that boosted the market sentiment:

GST Collection

The GST collection remained above Rs 1 lakh crore for the sixth month in a row, coming in more than Rs 1.29 lakh crore in December, 13 percent higher than the same month last year, but lower than Rs 1.31 lakh crore mopped up in November.

The revenue from goods sold and services rendered stood Rs 1,29,780 crore in December 2021, of which CGST is Rs 22,578 crore, SGST is Rs 28,658 crore, IGST is Rs 69,155 crore (including Rs 37,527 crore collected on import of goods) and cess is Rs 9,389 crore (including Rs 614 crore collected on import of goods), according to a statement from the finance ministry.

India’s manufacturing PMI remained above 50 for the sixth consecutive month, which could also be supporting the market to some extent amid rising uncertainty triggered by a spate in COVID cases.

“India’s manufacturing PMI (seasonally adjusted) showed expansion for the sixth straight month, consolidating to 55.5 in December from 57.6 in November. The PMI continued to find support from production and new orders, though cost pressures remain elevated. The survey, however, was conducted during December 6-17, before COVID cases started rising,” said Rahul Bajoria, Chief India Economist at Barclays.

Auto Stocks

Auto stocks continued to see buying interest as monthly numbers were largely in line with analysts’ estimates. The analysts had expected the auto sales data to be mixed in December 2021 with passenger vehicle sales seeing improvement and commercial vehicle numbers coming in strong with improved fleet utilisation. Two-wheeler sales remained weak due to increased ownership cost and channel destocking, while tractor sales also declined due to high base in the year-ago month and delayed harvest.

The Nifty Auto index rallied over 1.5 percent on top of 3 percent gains seen in the previous week. Experts largely see further improvement in the fourth quarter sales data with the chip shortage stalemate easing.

Eicher Motors was the biggest gainer with 5 percent gains, followed by Ashok Leyland, Tata Motors, Maruti Suzuki and Bajaj Auto, which gained 1-3 percent.

“In December 2021, automobile companies reported mixed performance. Passenger vehicle industry remained impacted on account of chip shortage and accordingly some companies reported YoY volume decline in this segment. However, consumer sentiment in the passenger vehicle industry remained positive and we expect swift recovery post resolution of chip shortage,” said Arun Agarwal, Deputy Vice-President, Fundamental Research, at Kotak Securities.

No Major Lockdowns

The state governments have imposed several COVID-19 restrictions to check the spread of virus, but there is no major lockdown-like situation seen in 2020, though India reported 33,750 cases in the 24 hours to 8am on Monday, the highest since September 2021, which overall seems to be making the street happy as there won’t be impact on earnings and economic growth.

“Even though Omicron is spreading fast, the market doesn’t expect any restriction on the economic activity that will impact growth and earnings,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

All Sectors in Positive Terrain

Nifty Bank was the leading sector with 2.3 percent gains and crossed the crucial 36,000 mark, indicating positive bias ahead. The rally could be ahead of the December quarter earnings that will be kicked off by HDFC Bank on January 15. The Nifty Financial Services index was up 2.1 percent.

The Nifty IT index also participated in the run, rising more than 1 percent ahead of the quarterly earnings. IT biggies like Infosys, TCS, Wipro and HCL Technologies will announce the December quarter earnings next week. Overall numbers are expected to be strong, despite seasonality factors, supported by a robust demand outlook.

Metal and Realty indices also gained more than 1 percent each, but Pharma corrected moderately after more than 5 percent rally in the previous week amid rising COVID cases.

Technical View

Technically, the Nifty50 seems to be on the right path, forming a bullish candle on the daily charts as it rallied more than 1 percent to move closer to 17,600, the crucial resistance levels, indicating positive momentum ahead. The index had also seen the formation of bullish candles on weekly charts last week.

“The short-term trend of Nifty continues to be positive and one may expect further upside in the short term. A sustainable move above 17,640 is likely to negate the bearish set-up and that could open more upside as per daily and weekly timeframe chart,” said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.

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