Nifty breaches 25,000 levels for the first time; what's boosting D-Street mood?

Nifty in a historic move has easily and swiftly climbed and moved past 25,000 levels on August 1 as global cues turned favourable. Here are the likely factors that propelled the move:

Global positive cues

Even as the US Fed maintained status quo, the most powerful bank suggested of a September rate cut, bolstering the stance for emerging market equities including India. After the decision, Fed Chair Jerome Powell said, "a reduction in our policy rate could be on the table as soon as the next meeting in September." Further he added that there has been made no decision about future meetings.

 Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. "The Fed chief signalling a possible rate cut in September is positive for global equity markets. More important, his comments that the US economy is normalising is a shot in the arm for bulls. The dip in the 10-year US bond yield to 4.05 is sharp and this may halt and perhaps may even reverse the FII selling in the cash market in recent days.

If both FIIs and DIIs turn buyers the market can spurt today but sustaining the rally would be difficult since valuations are getting stretched, he added.

Broader markets offer support

Despite steep valuations, broader markets are witnessing unprecedented gains. After hitting a fresh record high, Nifty Midcap 100 was seeing part selling-pressure. The energy stocks like Oil India and Suzlon Energy in addition to Lupin, NDMC and HDFC AMC spurred the gains on the index.

Fiscal deficit data suggest consolidation intact

India's fiscal deficit for the first quarter of this fiscal year through June stood at 1.36 lakh crore rupees, or 8.1% of annual estimates, government data showed on Wednesday. Also, it suggests a healthy strong domestic business activity and is likely to boost investor confidence.

Good monsoon also lifts sentiment

BOB Economics in its report dated July 30 said that the rainfall is currently 2% above the LPA till 29 Jul 2024. Pickup was noted towards the end of the month when 90.1mm rainfall was received between 22-29 July, versus 69.5mm in the 3rd week of July.

Q1 Earnings bode well

After better-than-expected earnings by the IT major, auto companies are also showing a cyclical upturn which looks impressive and is likely to sustain, noted Vijaykumar. Prashanth Tapse, Senior VP (Research), Mehta Equities said that corporate India appears robust amid this record high, reflecting a positive economic outlook. Meanwhile, the Federal Reserve has maintained interest rates at a 23-year high of 5.25 to 5.50%, signaling potential future adjustments.

Technicals 

Anand James, Chief Market Strategist, Geojit Financial Services on the Nifty outlook said after two days of failed attempts to slip past supports, yesterday marked a strong intention to push higher, with a close above our upside marker of 24900/28. This has now charted a quick trajectory towards 25192 shortly, and 25800 in the near term. Alternatively, inability to float above 24940/28 will signal a weakening of momentum, which will expose 24750-440 again.  -