Sensex closes above 52,000 for first time, Nifty at record high: Five factors behind the rally

Equity markets closed at record highs, with Sensex crossing the 52,000 mark for the very first time on Monday, tracking positive cues from global equities. Riding the gains in bank and realty stocks today, Sensex climbed 609 points to end at 52,154 and Nifty gained 151 points to 15,314.

IndusInd Bank, ICICI Bank, HDFC Bank, Kotak Bank and Bharti Airtel were among the top gainers today. Indian Oil, NTPC, ONGC, Tata Steel, Grasim Industries, Coal India and M&M were top losers on Sensex.

Last Friday, Sensex ended 12 points higher at 51,544 and Nifty fell 10 points to 15,163.

On the currency front, Indian Rupee gained by 7 paise to close at 72.68 against US dollar.

Here's a look at five factors that led to a rally in Sensex and Nifty today:

1. Key economic data

Equity markets set off with a strong start today, after release of key economic data, leading to broad-based buying in blue-chips. The Wholesale inflation, calculated on the basis of Wholesale Price Index (WPI), increased to 2.03% in January, in comparison to 1.22% in December 2020. Meanwhile, India's retail inflation, which is measured by the Consumer Price Index (CPI), eased to 4.06% in the month of January 2021 against 4.59% during December 2020.

Separately, the country's factory output, measured in terms of the Index of Industrial Production (IIP), witnessed a growth of 1% in December 2020 against 0.4% in December 2019, the data showed.

All commodities index stood at 2.03% in January 2021 as against 1.22% in December 2020, while Food index was at (0.26%) in January 2021 from 0.92% in December 2020.

Vinod Nair, Head of Research at Geojit Financial Services said,"Optimistic global sentiment & improving corporate earnings are leading an uptrend in the market dictated by banking and realty stocks. Mild consolidation is noticed in Pharma & IT, but Mid-caps continue to beat the broad market. WPI inflation soared to 2.03% in January compared to 1.22% in December which is positive for the manufacturing sector showing upside in demand. Food inflation dipped cooling CPI to 4.06% in January from 4.59% in December 2020, moderation in inflation is in-line with the RBI views, positive for the domestic economy."

2. COVID-19 cases fall

With the major key corporate earnings season out of the way, global equities are following optimistic developments on the virus front. Most affected countries like US, UK, Spain, Germany and South Africa recently witnessed a fall in infections and deaths tolls.

Dr. Joseph Thomas, Head of Research, Emkay Wealth Management said,"Markets elsewhere, in the East as well as early Europe, have been well supported by the fruition of large scale vaccination as also expectations of larger economic stimulus in the US."

3.  Rally in global markets

US stock indexes closed at record highs on Friday on hopes US stimulus will boost the economy with quarterly corporate earnings reports impressing analysts.

Traders said investors turned optimistic over the prospects of more financial aid from Washington, with coronavirus cases falling and vaccine rollout picking up steam.

Similarly, European and Asian stocks traded higher on Monday. Markets in China, Hong Kong, Taiwan as well as the U.S. are closed on Monday for holidays.

4. Banking stocks rally

Strong buying was witnessed in index heavyweights from banks, and realty space that supported the market rally. Banking and financial stocks such as HDFC twins, Bajaj twins, ICICI Bank, Kotak Mahindra Bank, Infosys, IndusInd Bank and Axis Bank led the rally.

Where Nifty Financial Services index gained 2.87% on the day. Nifty Private Bank index ended up 3.32% at 19866.55 today. Both Sensex and Nifty closed with a gain of more than 1%, on the back of Bank Nifty, that climbed by 3.65% to 37,425, recording a significant surge from the 31000-32000 levels.

5. Technical outlook

Key indices reached new record highs during the intra-day trade amid bettr than expected earnings. Traders said the post-Budget rally is still underway despite rich valuations of stocks, with Sensex and Nifty climbing over 12% since February 1. Today, Sensex hit a record high of 52,235 and Nifty hit a lifetime high of 15,340.

With stock markets scaling new peaks, BSE's market capitalization rose to Rs 205 lakh crore.

The recent uptick in high-frequency key economic data, prospects of Covid-19 vaccines pulling the global economy out of recession and rebound in corporate earnings kept investors optimistic worldwide. As per analysts, global markets will guide the market further.

On markets closing --Ashis Biswas, Head of Technical Research at CapitalVia Global research said,"Market witnessed a positive trend today after a few days of the lackluster movement. The expected levels of the market are likely to be in the range of 15250 and 15470, and it's going to be crucial for the short-term market scenario to sustain above the 15250 Nifty50 index level. The momentum indicators like RSI, MACD to support the upside move and indicating potential upside from the current market level."

Although, Sensex's climb to 52,200 levels and Nifty's breach of the psychological level of 15,300 mark has created new resistance levels for the index and is likely to face some consolidation in the index this week.

Jyoti Roy, DVP -Equity Strategist, Angel Broking said,"The Sensex has today hit new all time high levels of 52,000 driven by continued strong flows due to positive global cues. After record monthly inflows of over Rs. 60,000 in Nov and Dec 2020 flows slowed down somewhat in January to ~Rs. 19,500 crore. While we did see some profit booking in the second half of January the Union Budget 2020-21 turned the tide around for the market. So far we have already witnessed FII flows of over Rs. 20,000 crore in February which is helping drive the markets. We expect the flows to remain strong for now which should help propel the markets to new highs. However, we expect the pace of the rally to moderate from here  on and some profit booking cannot be ruled out at higher levels."

Stocks in news: Tata Motors, Airtel, Vodafone, PowerGrid, ONGC, Godrej Industries

Share Market Live: Sensex above 52,000 for first time, Nifty at 15,280; Airtel, HDFC twins top gainers