Why is Stock Market Rising Today? Bulls came raging on the D-Street as indices reversed gear to post a rebound on October 4, buoyed by upbeat quarterly updates by India Inc and heavy buying in the US and Asian markets. The declining dollar and US bond yield also lifted sentiment. Sensex rallied over 1,100 points and Nifty was placed above the 17,100 mark.
The market has been quite volatile in the last one week on global cues but now that the corporate earnings season is about to begin analysts are expecting the sentiment to improve. Since 2011, there have been only two occasions when Sensex has given negative returns in the festive month of October, which also marks the beginning of Q3 and the second half of the financial year.
“We expect (the Nifty50) index to sustain above the psychological mark of 17,000,” said analysts at ICICI Securities.
Market breadth favoured gainers. In the Nifty 50, 48 stocks gained led by IndusInd Bank, Bajaj Finance, Hindalco Industries, and TCS. The only two losers were PowerGrid and Dr Reddy’s Labs.
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said the risk-off, risk-on texture of the market is in response to fast-changing economic and market signals.
“For the near term, market sentiments have turned positive with a declining trend in dollar and US bond yields,” he said. “If this trend continues, foreign institutional investors (FIIs) will again turn big buyers in India and they will not get stocks cheap. Financials and autos are again set to lead the uptrend since their fundamentals and prospects are strong. Capital goods are likely to join the rally and telecom is on a strong wicket.”
September Quarter Earnings
Ahead of the September quarter earnings season, encouraging quarterly updates from companies lifted sentiment. Companies from various sectors reported stable growth that led to market-wide buying.
IndusInd Bank shares rose 5.7 per cent after it said second-quarter net advances rose 18 per cent year on year. Shares of Mahindra and Mahindra Financial Services surged 10 per cent after the company reported strong disbursement for September and improved collection efficiency.
FII Buying
After being net sellers to the tune of over Rs 7,000 crore in September, foreign institutional investors or FIIs bought Indian equities worth Rs 590 crore on the first trading day of Q3 i.e. yesterday.
“If this trend continues, FIIs will again turn big buyers in India and they will not get stocks cheap. Financials and autos are again set to lead the uptrend since their fundamentals and prospects are strong. Capital goods are likely to join the rally and telecom is on a strong wicket,” said Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Global Cues
The Dow Jones closed up 2.66 per cent on Monday in its biggest one-day advance in over 3 months as investors factored in the possibility that the US Fed might be forced to back away from aggressively tighter monetary policy.
Other Asian markets were also in a festive mood as Japan’s Nikkei jumped on Tuesday to its highest in nearly two weeks. Markets in mainland China and Hong Kong are closed for a holiday.
Dollar, Yields Soften
The Dollar Index, which pits the US currency against the euro and four other rivals, hit a more than a week low of 111.40, losing some 2.2 per cent over a four-day span.
Meanwhile, the yield on the US 10-year Treasury note tumbled to a September 22 low of 3.587 per cent, making riskier assets like emerging market equities attractive.
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