Sensex, Nifty scale new highs; here are the key factors behind market rally

Domestic equity markets kicked off the month of March with a bang as headline indices scaled new record highs during Friday's trading session. Both BSE Sensex and Nifty50 hit new all-time highs amid all-round buying fueled by the host of domestic and global macroeconomic factors, cheered by the traders.

For the day, BSE Sensex touched new record highs of 73,819.21. However, BSE's 30-share barometer finally rallied 1,245.05 points, or 1.72 per cent, to settle at 1245.05. NSE's Nifty50 topped 22,350-mark for the first time, but finally settled at 22,338.75, surging 355.95 points, or 1.62 per cent, for the day.

Broader markets underperformed as the BSE midcap index added less-than a per cent, while the smallcap index rose two-third a per cent. India's fear gauge eased more than 2 per cent to end the week at 15.24-levels. The Nifty IT, media, healthcare and pharma stocks were the major laggards, but buying in financials, banks, metals and auto propeller the rally.

Here are the key factors that pushed the headline indices higher on Friday.

India's GDP numbers
Indian economy grew at 8.4 per cent in the December 2023 quarter, which was above estimates, aided by strong manufacturing and construction activity, the official data showed. This was the fastest pace of economic growth in six quarters. Barclays forecasted a Reserve Bank of India rate cut in the third quarter of calendar 2024.

India reported a robust GDP growth because of double-digit growth in the manufacturing sector. The FY24 estimate was also revised upwards to 7.6 per cent from 7 per cent. India is clearly on a high and sustained high growth path, said Manoranjan Sharma, Chief Economist at Infomerics Ratings.

US Inflation data
The US inflation eased to 2.4 per cent in the year January 2024, according to the metric used by the US Federal Reserve for its inflation target. The in-line readings of the US inflation reinforced expectations for a rate cut in June. US stocks settled higher, and the Nasdaq reached a record high close on Thursday in over two years, its latest rally propelled by investor optimism.

Benchmark Equity Indices opened on a positive note and surged into the green sharply, said  Avdhut Bagkar Technical and Derivatives Analyst, StoxBox. "Better-than-expected Core PCE reading, the Fed’s preferred inflation gauge met consensus forecasts, helped ease concerns surrounding interest rate cuts," he said.

Buying in blue-chips
Buying in index heavyweights pushed the headline indices higher. Four stocks- ICICI Bank, HDFC Bank, Reliance Industries and Larsen & Toubro- added about 740 points, or about 60 per cent of 1,245 points rally Sensex witnessed during the session.  State Bank of India and Tata Steel were other key gainers.

Global stocks
Global shares were buoyant on Friday after US consumer price data contained no nasty surprises, keeping intact hopes of central bank rate cuts in coming months. Global investors were betting on both the US Federal Reserve and the European Central Bank lowering borrowing costs in June this year.

Auto sales
Indian automakers continued to report a steady rise in sales in February, helped by demand for two-wheelers and utility vehicles, monthly sales data from companies showed. TVS Motors surged more than 6 per cent, while Maruti Suzuki India gained over 3 per cent. Tata Motors was also up 3 per cent for the day, while Hero MotoCorp and Bajaj Auto added 2 per cent each.

Positive FII data
Provisional data available with NSE suggest that FPIs turned net sellers of domestic stocks to the tune of Rs 3,568.11 crore on Thursday. On the other hand, domestic institutional investors (DIIs) dumped Indian equities to the tune of Rs 230.21 crore in the previous session. Overseas investors pumped a total Rs 1,539 crore in the local equities in the entire month of February.

Technical factors
Nifty remained above 22,000 in the early hours, propelling the market upward throughout the day. The index's consolidation breakout, coupled with sustained movement above the moving average, fueled a robust rally, said Rupak De, Senior Technical Analyst, LKP Securities.

"Notably, the Relative Strength Index (RSI) confirmed a bullish crossover, indicating positive momentum in the market. Sentiment is optimistic for potential upward movements, with expectations of buying into dips. On the upper scale, resistance is apparent at 22,400-22,600, while support is placed at 22,200," he added.