Sensex gains 588 points, Nifty ends at 11,300; Five factors behind the rally

Sensex and Nifty ended on a bullish note on Tuesday, amid positive global equities and healthy buying interest seen in index heavyweights throughout the session. Bucking the trend from yesterday's losses, Sensex closed 588 points higher at 38,492 and Nifty was rising 168 points higher at 11,300. Yesterday, Sensex closed 194 points lower at 37,934 and Nifty fell 62 points to 11,131.

Benchmark indices opened marginally higher and gained momentum in the first hour of trade. With European equities reversing the trend, benchmark indices gained majorly by the last hour of the session and closed almost 1.5% higher each.

In India, domestic investors also shrugged off concerns of rising coronavirus cases that saw a record jump of nearly 45,000 infections over the last 24 hours and came to 14.8 lakh by Tuesday morning, with total deaths standing at 0.33 lakh. Worldwide, there are 166 lakh confirmed cases and 6.56 lakh deaths from the coronavirus COVID-19 outbreak. As per market analysts, traders have turned optimistic on the back of hopes of proposed $1 trillion coronavirus aid package in US.

Here's a look at five factors why Sensex and Nifty ended higher today:

Global markets

European markets turned positive today, bucking concerns from US-China tensions and focused on global rally. Asian markets too reversed the trend in early session today, as investors continued to watch for developments on vaccine front and fresh stimulus packages.

Wall Street closed higher on Monday as US Senate Republicans on Monday proposed a $1 trillion coronavirus aid package as the virus pandemic has killed nearly 150,000 people in the country. US futures were also bouyed ahead of the two-day US Federal Reserve's meeting, concluding tomorrow.

FOMC meet

Traders said markets will continue taking cues from the worldwide trend. As per market analysts, the US Fed meeting scheduled this week and key economic data announcements will be on investors' radar and market trend will depend upon commentary from the monetary policy meeting.

Ajit Mishra, VP - Research, Religare Broking said,"Going ahead, the FOMC meet outcome (on 29th July) would be one of the key events to watch out for. Besides, the key economic data points would provide more clarity on the recovery in the economy."

"Liquidity has been a key driver for the market performance, and the Fed decision is likely to be greeted positively," said Vinod Nair, Head of Research at Geojit Financial Services.

Technical View

In the last few sessions, Nifty is consolidating in the range of 11250-11050. On the higher side, the index will face hurdles around 11,270 and 11,400 levels, where prior positive gaps are placed. However, in case of decline, support is placed at around 11,071 and then at 11,011 levels.

"We advise continuing with a positive yet cautious approach as Nifty is inching closer to the next hurdle at 10,350 levels," said Ajit Mishra.

Q1 Earnings

Q1 earnings announcements from select Nifty majors in July have kept the participants optimistic. Stock specific momentum was registered in the listed firms, ahead of April- June quarter results today.

"Some of the stocks rallied on the basis of their earnings results with operating margins and earnings visibility being the key notables", said Vinod Nair.

Today, companies that will report their Q1 earnings include Nestle India, IDBI Bank, IDFC First Bank, RBL Bank, Hexaware Technologies, NIIT Technologies, Quess Corp, Castrol India, Greenlam Industries, Max Ventures, Sunteck Realty, Tata Coffee and Welspun Corp.

Strong buying sentiment

Barring media, all the other sector-based indices closed in green territory, with maximum gains registered in auto and IT stocks.

S Ranganathan, Head of Research at LKP Securities said,"Key indices scaled up high today amidst all-round buying witnessed across Banking, IT, Autos, Cement and many more sectors as investors shrugged off pessimism in what turned out to be a show of strength by the Bulls as the rally gathered momentum in late afternoon trade."

Ajit Mishra said," On the sector front, all indices ended in green wherein Auto, IT and Metal were the top gainers. The broader markets too participated in the upmove but underperformed the benchmark as both Midcap and Smallcap index ended higher by 0.8% and 0.6% respectively."

Share Market Highlights: Sensex ends 588 points higher, Nifty at 11,300; Kotak Bank, TCS top gainers

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