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Sensex zooms over 300 pts, Nifty tops 12,200; 4 factors driving the rally

NEW DELHI: Positive developments on the US-China trade deal front and fund infusion in some PSU banks by the government boosted sentiment on Dalal Street on Friday. Stocks benchmarks Sensex and Nifty were on track to snap three-day losing run.

BSE benchmark Sensex jumped as much as 365 points during the day. It was trading at 41,467, up 303 points at 2.25 pm. NSE flagship Nifty was up 86 points to 12,213.

Banking stocks were among major gainers. In the Sensex, Axis Bank was up 2.61 per cent at Rs 755.40 and SBI advanced 2 per cent to Rs 336.45. Power Grid, Bharti Airtel and Reliance Industries were among other top gainers.

Nifty PSU bank was the biggest sectoral gainer on NSE, up 2.57 per cent. All but two constituents of the index were trading in the green. The biggest gainer was Indian Overseas Bank that added 6.19 per cent to Rs 12.

Here are four factors driving the rally:

US-China trade deal
Positive comments from the US and Chinese camps about the trade deal encouraged traders to move towards riskier assets.

China’s Commerce Ministry said on Thursday that Beijing and Washington were still in the process of completing necessary procedures while maintaining close communication to sign the deal.

US President Donald Trump had said earlier said he and Chinese leader Xi Jinping will have a signing ceremony to sign the first phase of the U.S.-China trade deal agreed to this month.

PSU Banks to get further boost?
Shares of PSU banks surged ahead of a key meeting between Finance Minister Nirmala Sitharaman and bank chiefs on Saturday. The meeting, which comes a month ahead of Union Budget, is also expected to take up discussion on non-performing asset recovery through both NCLT and non-NCLT means apart from a review of financial performance of the lenders and their business growth.

Moreover, three banks announced capital infusion from the government — Allahabad Bank, UCO Bank, and Indian Overseas Bank.

Global cues
Indian markets took positives from their global peers as most major markets across the world gained on Friday. Asian shares scaled an 18-month high. MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 0.7 per cent to 555.42, a level not seen since mid-2018. It is up more than 16 per cent so far this year. Japan’s Nikkei was off 0.4 per cent, but on track for a near 19 per cent rise this year, matching the annual increase of 2017.

Australia’s benchmark index rose 0.4 per cent. Chinese shares gave up early gains with the blue-chip CSI300 down 0.1 per cent. In early European trade, the pan-region Euro Stoxx 50 futures added 0.4 per cent, German DAX futures rose 0.6 per cent while FTSE futures were up 0.5 per cent.

In the overnight trade, the US market hit record highs. The Nasdaq crossed the 9,000-point mark for the first time on Thursday. In an indication of a positive start on Wall Street, the S&P 500 e-mini futures gained 0.12 per cent on Friday.

Technical factor
Technical indicators point that some strength and stability should be expected in the market if the index manages to sustain above 12,222 on closing basis, according to Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory,

“However, in such a scenario in the next couple of sessions, it can retest recent swing highs of 12,293 where as in best case if the same strength prevails next week also then Nifty may head towards 12,350,” Mohammad said.

He added that on the downside it is imperative for the index to sustain above 12,157 as breach of this shall only negate today’s optimism but can also threaten the recent low of 12,118.

Source: Economic Times