The Indian stock market rallied impressively today, marking a sharp rebound after a series of lackluster sessions. Both the Sensex and Nifty 50 surged over 1%, bolstering market sentiment as investors geared up for the final trading week of October. The Sensex kicked off with a robust opening at 79,653.67, climbing 1.3% from the previous close of 79,402.29. Similarly, Nifty 50 saw a jump, crossing the 24,400 level with gains of over 1%. This uptrend comes on the heels of five straight sessions of declines and has been fueled by five key factors that investors should keep an eye on.
1. Positive Global Cues from Asian Markets
Asian markets set the tone with an optimistic outlook, particularly in Japan, where stocks soared following political developments. The yen hit a three-month low after Prime Minister Shigeru Ishiba’s coalition lost its parliamentary majority. This regional upswing has lent considerable support to Indian markets as well, contributing to a positive start to the week.
2. Short-Covering Rally
After days of market correction, the Indian market witnessed a robust short-covering rally today. Analysts attribute this turnaround to a pattern seen after significant market dips, where investors close out short positions, triggering a rally. The Nifty 50’s 2.58% dip last week, marking a fourth week of declines, created room for this resurgence. Additionally, stronger performance by large-cap stocks, particularly in banking, has driven today’s positive sentiment.
3. Sectoral Strength in Key Indices
Today, gains were seen across all sectoral indices, with PSU Bank, Metal, Auto, and Realty sectors leading the way. Banking stocks such as ICICI Bank, Bank of Baroda, and Punjab National Bank fueled this rally, with ICICI Bank’s Q2 earnings playing a major role in lifting investor confidence. Bank Nifty surged past the 51,400 mark, adding to the overall market momentum.
4. Technical Factors Indicating a Bounce
Nifty 50 tested its support level at 24,100 on Friday, managing to end on a bullish note with a strong wick on the downside, hinting at buyer activity. Breaking the resistance at 24,400 today, Nifty is in a promising position to further test 24,750. This week, the historical performance of the 44th trading week of the year indicates an 80% probability of gains, averaging a 1.4% increase. Analysts, however, caution that the Nifty will face significant resistance between 24,413 and 24,462.
5. Decline in Crude Oil Prices
A dramatic drop in crude oil prices by over 4% further bolstered market sentiment. After Israel’s recent strike on Iran did not impact oil or nuclear facilities, Brent crude dropped to $72.77 per barrel, and WTI fell to $68.56. This price dip benefits India, a major crude importer, by potentially easing inflationary pressures. Lower inflation could provide the Reserve Bank of India (RBI) room to maintain or even lower interest rates, which would support further economic growth.
Market Movers: Top Gainers and Losers
Today’s rally saw Shriram Finance, Mahindra & Mahindra, ICICI Bank, Adani Enterprises, and IndusInd Bank as top gainers on Nifty 50, while Coal India, Bharat Electronics, Tech Mahindra, SBI Life Insurance, and Axis Bank were among the few to close lower.
Looking Ahead
While today’s market rally is an encouraging sign, it’s essential to watch for potential resistance and economic developments globally. Investors are advised to keep an eye on crude prices, sectoral trends, and technical support levels as the week progresses.