Nifty50 races past 22,127 to fresh lifetime high; check out key factors powering the rally

Stock market news, stock market today: Domestic equity benchmark Nifty50 jumped by as much as 131 points, or 0.6 per cent, to scale a lifetime high of 22,171.8 on Monday, surpassing an existing peak of 22,126.8 registered on February 2. The milestone came about even as the mood across global markets remained subdued amid diminishing nascent hopes of early reductions in benchmark interest rates.

The leaner, 30-scrip index Sensex gained as much as 400.7 points, or 0.6 per cent, to touch 72,827.3 on the upside, coming within 600-odd points of an all-time high registered on January 16.

Here’s a summary of the likely key triggers propelling the Nifty’s rise to the fresh record high:

Strong earnings:

An overall positive October-December earnings season has been the key positive cue for the Street, say analysts.

"An important takeaway from the Q3 results is the improving profitability of India Inc. EBITDA and profit after tax are growing impressively even while sales growth is average. Automobiles, pharmaceuticals and capital goods are doing very well," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“In banking there is impressive credit growth and improving profitability. PSU banks are outperforming private sector banks due to low valuations which continue to be fair even after the run up in prices,” the analyst added.

What’s leading the rally?

While index heavyweights such as BPCL, Bajaj Auto, Hero MotoCorp, ONGC and Coal India, Tata Motors, Wipro and SBI have rallied the most among blue-chip stocks over the past few weeks, powering the Nifty50’s rally to the latest record high, stocks such as UPL, HDFC Life, Bajaj Finance, ITC, HUL and HDFC Bank have played spoilsport.

No rate cut in China, yet:

China’s central bank skipped a chance to cut rates, once again, on Sunday, which will likely limit downward pressure on the yuan, but with deflation looming analysts see plenty of scope for further policy stimulus. The same cannot be said for the US as high readings on producer and consumer prices saw markets sharply scale back pricing for rate cuts.

Meanwhile, China's economic downturn will be positive for India, believe many analysts.

"With the outlook continuing to be strong for India, we expect India to attract more money on its own merits, but China’s failures would only add fuel to the fire," said Alok Agarwal, Head Quant and Portfolio Manager at Alchemy Capital Management.

Energy stocks continue to drive gains:

From the Nifty Oil & Gas pack, all stocks barring Hindustan Petroleum and GSPL traded with gains of up to four per cent on Monday.

The Nifty Oil & Gas is among the top-three gainers among NSE’s sectoral indices, having risen as much as 15.7 per cent in the past month against a 2.6 per cent rise in the Nifty50 gauge.

"We remain overweight on the oil and gas sector, and GAIL remains our top stock pick. Indian CGD companies have underperformed the broader market in the last two-to-three years but as LNG prices fall (they have already started falling to some extent), alpha will be generated by these companies," according to Incred Equities.

The Nifty PSU Bank and Nifty Healthcare gauges are also among the top gainers, with upmoves to the tune of 20 per cent and 10 per cent in one month, respectively.

Technicals:

Friday’s wobbliness suggests that the rejection trades usually seen on approach to previous peak have been accounted for, probably clearing the path for a smooth sail to 22,450-22,550 initially, with minor resistance spotted near 22,175-22,250, according to Anand James, Chief Market Strategist at Geojit Financial Services.

“Downside markers will remain at 21835, the closest congestion point of note, but 22000 could serve the purpose for the day equally well,” James added.

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