Sensex hits fresh lifetime high; 5 factors behind the rally

After a lacklustre trend last week, the domestic market traded majorly bullish on Monday over positive global cues and across-the-board buying.

Benchmark indices rallied more than a 1.25% each, with Sensex hitting a new lifetime high of 40,868.30 and Nifty rising intraday to a 4-month high of 12,067.35, trading less than 35 points away from its all-time high of 12,103.05.

Amid renewed optimism over US-China trade truce, benchmark BSE S&P Sensex surged 530 points to hit a fresh closing high of 40,889.23, while NSE Nifty50 soared 164 points higher to end Monday's trade at 12,079.

"BSE Sensex scaled fresh record high today of 40900 ahead of the MSCI rejig as hectic buying in key pivotals was witnessed," quoted S Ranganathan, Head of Research at LKP Securities.

While all the sectoral indices traded green, barring media, both the broader market indices BSE mid-cap and small-cap too gained 1.2% and 0.8%, respectively.

1. Buying across the sectors

On the sectoral front, heavy buying was witnessed across the sectors. All the indices except Nifty Media ended in the green with the metal space outperforming the most.

"Telecom, Metal and Realty were the biggest gainers in the range of 2.0-6.8%," Ajit Mishra, Vice President, Research, Religare Broking Ltd.

"Most of the NIFTY constituents across sectors like BFSI, Telecom and Metals saw buying activity and short-covering too was seen in many heavyweights", quoted S Ranganathan, Head of Research at LKP Securities.

"A pick-up in credit disbursement led by PSU banks over the festive period coupled with fiscal easing has contributed to stronger consumer demand across segments - this reflected in strong Financials and Consumer stocks", quoted S Hariharan at Emkay Global Financial Services.

2. US-China trade deal optimism

Gains in the domestic market today were in-line with global markets that jumped higher as media reports suggested that a preliminary trade deal between the US and China may be signed by the end of this year.

"Cues that US & China will conclude a deal by next month lifted the sentiment across the globe," quoted Vinod Nair, Head of Research at Geojit Financial Services.

Brent futures, the global oil benchmark too rose 0.11 per cent to USD 62.44 per barrel, over US-China trade deal optimism.

Concerns over the 16-months-prolonged trade war dispute between the world's leading economies have weighed on markets last week and kept investors' sentiments muted globally.

3. Global stocks rally

Global equities were enthused as both Washington and Beijing made positive comments on the potential for a trade deal.

"Positive statements made by both officials last week indicating that a trade pact is likely by the end of December 2019 are being welcomed," quoted Sandeep Nayak, ED & CEO of Centrum Broking.

Asian markets traded with a positive bias and in line with the global cues, with bourses in Shanghai, Hong Kong, Seoul and Tokyo climbing 1.50%  higher.  

Further stocks in Europe were also trading bullish, while the outperformance of recent US economic data coupled with trade deal optimism helped Wall Street indices close higher.

4. FPIs bullish on India

Continuing their buying streak for the third straight month, foreign portfolio investors (FPIs) have kept their outlook bullish for November.

Foreign portfolio investors (FPIs) have pumped in a net sum of Rs 17,547.55 crore into equities and Rs 175.27 crore in the debt segment during November 1-22, taking the cumulative net investment to Rs 17,722.82 crore.

According to market participants, after the outflow in July and August, FPIs have have gained confidence in the Indian equity markets, due to several government fiscal stimulus measures introduced this year, such as rollback of super-rich surcharge, merger and recapitalisation of PSU banks, new developments over divestment to curb fiscal deficit and five consecutive rate cuts from the Reserve Bank of India.

"Signs of a cooling in rhetoric between US & China has contributed to a resumption in foreign flows into India," quoted  S Hariharan from Emkay Global Financial Services.

"Moreover, FIIs are preferring emerging markets such as India as the recent easy monetary stance of Fed & ECB has improved liquidity in world markets," said Sandeep Nayak, ED & CEO of Centrum Broking.

5. Technical front

Market experts have continued to retain a positive outlook on Nifty's trend, that traded mostly lacklustre last week which has now risen above its earlier consolidation levels.

On its weekly charts, Nifty formed three back to back "Doji" candlestick pattern with candles quoting 12,000-12,050, suggesting signs of indecision at this level. While 11,800-11,850 levels are acting as a strong support for Nifty, the zone of 12000-12050 continues as a vicinity of resistance.

"Recently, we have seen a consolidation phase in the Nifty index wherein the index had traded within the range of 11800-12050 in this calendar month," quoted Ruchit Jain, Equity Technical Analyst from Angel Broking.

"The time-wise correction now seems to be over and hence, we expect the momentum to accelerate from hereon to take the indices to the unchartered territory. Infact, we will not be surprised if the markets show a gap up opening to register new highs and then continue its northward trajectory," he added.

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