Why is the stock market rising today? The bulls roared through D-Street as the indices flipped and rebounded on October 4, supported by optimistic quarterly updates from India Inc and strong buying in the US and Asian markets. Falling interest rates on the dollar and US bonds also contributed to sentiment. Sensex rallied above 1,100 points and Nifty was placed above 17,100.
The market has been quite volatile over the past week due to global signals, but with the corporate earnings season about to kick off, analysts expect sentiment to improve. Since 2011, there have been only two negative returns from Sensex in the holiday month of October, which also marks the start of the third quarter and second half of the fiscal year.
“We expect (the Nifty50) index to remain above the psychological barrier of 17,000,” analysts at ICICI Securities said.
Market width favored gainers. In the Nifty 50, 48 stocks led by IndusInd Bank, Bajaj Finance, Hindalco Industries and TCS gained. The only two losers were PowerGrid and Dr Reddy’s Labs.
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said the market’s risk-off, risk-on texture is a response to rapidly changing economic and market signals.
“For the short term, market sentiment has turned positive with a downward trend in dollar and US bond yields,” he said. “If this trend continues, Foreign Institutional Investors (FIIs) will once again become big buyers in India and will not get stocks cheaply. Financials and autos will once again lead the uptrend as their fundamentals and outlook are strong. Capital goods are likely to join the rally and telecom is on a strong wicket. ”
September quarter profit
Ahead of September’s quarterly earnings season, encouraging quarterly updates from companies boosted sentiment. Companies from various sectors reported stable growth leading to market-wide purchases.
IndusInd Bank shares rose 5.7 percent after it said net advances rose 18 percent year-on-year in the second quarter. Shares of Mahindra and Mahindra Financial Services rose 10 percent after the company reported strong payouts for September and improved collection efficiency.
FII Purchase
After being net sellers for more than Rs 7,000 crore in September, foreign institutional investors or FIIs bought Indian shares worth Rs 590 crore on the first trading day of Q3 i.e. yesterday.
“If this trend continues, FIIs will again become big buyers in India and stocks will not get cheap. Financials and autos will once again lead the uptrend as their fundamentals and outlook are strong. Capital goods are likely to join the rally and telecom is on a strong wicket,” said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Global clues
The Dow Jones closed 2.66 percent higher on Monday in its biggest one-day advance in more than 3 months, as investors anticipated the possibility that the US Fed could be forced to pull out of an aggressively tightening monetary policy.
Other Asian markets were also in a festive mood as Japan’s Nikkei jumped to its nearly two-week high on Tuesday. Mainland China and Hong Kong markets are closed for a holiday.
Dollar, yield softer
The Dollar Index, which pits the US currency against the euro and four other rivals, reached a low of more than a week at 111.40, losing about 2.2 percent over a four-day period.
Meanwhile, US 10-year Treasury yields fell to a September 22 low of 3.587 percent, making riskier assets such as emerging market stocks attractive.
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