Nifty50 registers fresh all-time high—What's driving relentless gains on Dalal Street?

Domestic equities extended their surge to reach yet another milestone, with the Nifty50 benchmark crossing the existing peak of 21,026 to a fresh all-time high on Tuesday, December 12. 
The 50-scrip blue-chip index registered a fresh lifetime high of 21,037.9, taking its total year-to-date gains to more than 16 per cent. The Sensex also gained marginally to touch 70,033.6 on the upside, coming within inches of a record high of 70,057.8 logged the previous day. 

Analysts attribute the positive sentiment on Dalal Street to a combination of factors, including buoyancy in world markets, steady FII inflows, favourable crude oil prices, and hopes of an earlier-than-expected reversal of the recent tightening of monetary policy.    

Here are some of the key factors propelling the market to unprecedented heights: 

Global markets

After the US markets in overnight trade ended at fresh 2023 highs, most Asian markets traded on a positive note on Tuesday. While MSCI's broadest index of Asia Pacific shares outside Japan rose as much as 0.6 per cent, Japan's Nikkei 225 benchmark jumped 1.2 per cent after a dovish outlook by the country's central bank. 

Investors remained in a wait-and-watch mode ahead of key central bank meetings scheduled this week and the release of US consumer inflation data due later on Tuesday.

Hopes of status quo on US benchmark interest rates 

The US Federal Open Market Committee (FOMC), scheduled to begin two-day deliberations later in the day, is widely expected to maintain a status quo on policy rates. Currently, the headline interest rates in the world's largest economy stand in the range of 5.25-5.5 per cent.

FII buying

On Monday, FIIs net bought Indian equities worth Rs 1,261.1 crore, taking their net purchases for the month to Rs 12,135.9 crore so far, according to provisional exchange data. 

After a hiatus, FIIs are infusing fresh flows into Indian equities on expectations of political stability after the BJP stormed to power in three major states, amid robust economic growth. softening inflation, a steady decline in US bond yields, and a correction in crude oil rates. Many analysts anticipate FII inflows to continue going forward. 

"FPI inflows are likely to continue. FPIs have turned buyers in leading banks where they have been sellers. Large-cap stocks in segments like IT, telecom, automobiles and capital goods are also witnessing buying. This trend is likely to continue," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Technical factors

Levels above the 21,000 mark need to be maintained by the Nifty50 for the upside trajector to continue, according to Anand James, Chief Market Strategist at Geojit Financial Services. 

The analyst sees the Nifty reaching 21,130-21,220 levels initially, and even 21,600 subsequently, but with a warning that "anything beyond those levels is less likely without a meaningful correction". 

Alternatively, a slide below the 20,980 levels could signal intraday weakness, but "we would wait for a drop past 20,800 to play large downsides", he added.

For the past couple of days, the Index has been oscillating in a narrow range but the positive side is that the support levels have shifted upwards, said Aditya Gaggar, Director at Progressive Shares. The immediate hurdle is at 21,090 while the downside is protected at 20,900, the analyst added.  

Crude oil

Crude prices continued to trade higher on Tuesday ahead of the key interest rate decisions and amid oversupply concerns.  Benchmark Brent crude futures quoting below $80 per barrel is widely considered a key positive for India, which meets more than four-fifths of its oil needs through imports.