Sensex, Nifty gain nearly 4% to all-time high; what is driving D-Street's dream run?

On expected lines, Indian equities marked a record-high in Monday’s session boosted by the exit poll outcome which hints at the continuity of the current government.  Boosted by the benign newsflow, Sensex marked a new record high of 76,738.89 levels, while Nifty gained to 23,338.7, marking a gain of nearly 4 per cent intra-day. Meanwhile, Nifty Bank opened above 50,000 levels for the first time and marked a new all-time high of 50,990 levels.

"Fundamentals, technicals and sentiments turning favourable at the same time are rare in the market.  This is what has happened now. The market went into the big event, elections, very light with Nifty correcting around 600 points from the May highs. Profit booking also happened on a large scale. The short position in the market also is high. All these are going to change dramatically. DIIs, HNIs, retail ...are all going to turn buyers. Short-covering can add to the momentum," said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services on the markets performance today.

Here are the likely factors which pushed headline indices and Bank Nifty to record high:

Exit poll data:

As the exit polls released on Saturday predicted a clear victory for the BJP-led NDA in the Lok Sabha Elections 2024, the D-Street is largely cheering the policy continuity that would come with the current government .

“The exit poll numbers are very strong for incumbent govt and I think markets may not have priced in such strong numbers and we could see some reflection of that on Monday opening trade,” said Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers.

Robust Q4 and FY24 GDP

The official data released on Friday showed that India's gross domestic product (GDP) grew 7.8 per cent in January-March, better than economists' expectations. For the full FY24, the GDP was recorded at a strong 8.2 per cent as against 7 per cent in the previous year. The GDP numbers which came on Friday were better than expected with 8.2% growth. This will provide fundamental support to the market. S&P’s upward revision of India’s rating outlook also is positive, Vijayakumar added.

GST collection has been strong in May:

For May, GST collection has been recorded at Rs 1.73 lakh crore, up 10 per cent on year, showed the latest data released by the Ministry of Finance. The strong growth in GST collection also aided the already uplifted mood on the D-Street. In the previous April month, GST collection surpassed Rs 2 lakh crore levels for the first time.

Low FII index position suggested a strong start to the June series:

Earlier Zee Business Managing Director Anil Singhvi noted that the low FII position in the index ahead of the key Lok Sabha elections 2024 outcome is positive and will likely trigger a bull run on the D-Street in June. Further, he added that if the poll outcome remains on expected lines, there can be big short covering.

Indian markets mirror Wall Street's best day in 2024

Indian markets staged a strong show today mirroring strong sentiment on Wall Street. The blue-chip index Dow Jones Industrial Average on Friday ended 575 points or 1.51 per cent higher, marking the best day in 2024. In the pre-market open, all the 3 major US indices traded with gains of up to 0.35 per cent.

Fall in crude oil price

Oil prices continued to decline in Monday's trade even as the OPEC+ signalled deep output cuts well into 2025. Brent futures for August delivery were down 24 cents, or 0.3 per cent at $80.87 a barrel while US West Texas Intermediate (WTI) crude futures for July delivery fell 19 cents, or 0.25%, to $76.80. The decline in crude oil price is positive for Indian economy and the D-Street as India imports most of its crude requirement.

Technical factors

Friday’s inside bar sets up Nifty to reverse last week’s downsides, noted Anand James, Chief Market Strategist, Geojit Financial Services. Further, he states that being at the 20-day  SMA with fast stochastics at lower extreme, the anticipated upswing will have room for upside till at least 23065 with a key fibo seen at 23480, should a range breakout unfolds. 

Wild case scenarios projected from Friday’s closing of VIX pips the upper range at 24130 and lower range at 20930. Failure to float above 23065, will signal rejection trades, but will require a close back below 22954-841 for bears to dominate, in which case 22700-550-300 will be in play, he added.

(The story will be updated shortly)