Sensex closes above 40k for first time, Nifty hits record high: Five factors that propelled the rally

The Sensex and Nifty hit fresh all-time highs on the first trading day of this month today seven sessions after the indices breached the key 40,000 and 12,000 levels for the first time ever when Lok Sabha election results were announced on May 23.  While Sensex rose 594 points to reach 40,308 to reach fresh all-time high, Nifty gained 181 points to 12,103, a new high for the 50-share index.

At closing too, benchmark indices logged record high levels. While Sensex closed 553 points higher at 40,267 level, Nifty rose 165 points to 12,088 level.

Driven by a robust show by benchmark indices, investor wealth rose by Rs 1.76 lakh crore on BSE.

Hero MotoCorp (6.01%), Bajaj Auto (3.92%) and IndusInd Bank (3.70%) were the top Sensex gainers. Of 30 Sensex stocks, 27 ended in the green.

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ICICI Bank (0.13%), NTPC (0.11%) and ITC (0.04%) were the top Sensex losers.

Here's a look at factors why Sensex, Nifty hit fresh all-time highs in trade today.  

Rate cut hope from RBI

The RBI may go for another round of rate cut, third in a row, on Thursday to prop up the economic growth which dropped to a five-year low in the final quarter of 2018-19, experts said. The growth rate of the economy has weakened mainly due to poor performance in the farm sector as well as in the manufacturing sector.

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The MPC headed by RBI Governor Shaktikanta Das is holding a meeting for three days beginning today to firm up the second bi-monthly monetary policy of the fiscal.

According to traders, investors are lapping up stocks amid expectations of an interest rate cut by Reserve Bank of India (RBI) this week.

Falling crude oil prices

Brent crude prices have been falling for one week now benefiting the prospects of the Indian economy. From $70.11 per barrel on May 27, 2019, brent crude prices have fallen to $62.66 per barrel. India imports 81 per cent of its crude oil needs and is the third-largest importer of oil after US and China. Since payment of crude oil prices is done in dollars, a lower crude rate leads to lesser amount of rupee being converted to dollar, thereby strengthening the Indian currency.

This is good news for the Indian currency since low crude oil prices will lead to a fall in current account deficit.

Rupee rebound

The rupee has gained 61 paise since Thursday. On Thursday, it settled at 69.87 level to the dollar. Currently, the Indian currency is hovering around 69.26 level per dollar.  A strengthening rupee too boosted investor sentiment on the Dalal Street, traders said.

Key government policies

The Modi government in its first Cabinet meeting last week approved a proposal to extend the benefit of Rs 6,000 per year under the PM-KISAN scheme to 14.5 crore farmers in the country.

The government also cleared Pradhan Mantri Kisan Pension Yojana under which small and marginal farmers will receive a minimum fixed pension of Rs 3,000 per month on attaining the age of 60 years.

The Modi government also approved a new scheme, which assures minimum monthly pension of Rs 3,000 to all shopkeepers, retail traders and self employed persons after attaining the age of 60 years, fulfilling its poll promise. The decision will benefit 3 crore retail traders and shopkeepers. The implementation of above decisions will leave more cash in the hands of beneficiaries which will raise the consumption and spending levels benefiting businesses and companies across the economy.

FII inflows

FIIs pumped Rs 9,031 crore into Indian markets last month on hopes of continuity of reforms process by the new government. Foreign investors were net sellers for the first three weeks of May but the re-election of Modi government on May 23 gave FIIs inflows a major push in to the  Indian market which boosted sentiment among traders and investors. 

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Share Market Update: Sensex closes above 40,000 for first time, Nifty too ends at record closing high