Sensex touches 70,000 for first time, Nifty scales fresh peak; What's driving the indices higher?

Stock market today, share market news: Indian equities continued their winning run for the ninth day on Monday, December 11, with a one-day hiccup. The S&P BSE Sensex hit the crucial 70,000 level for the first time and marked a new all-time high of 70,048.9, with year-to-date gains now at 15 per cent, Nifty, on the other hand, surpassed 21,000 levels and notched a record high of 21,019.8.

Here are the factors that are propelling a new high on Indian indices:

Strong macroeconomic data

Over the weekend, PM Modi said that India’s GDP of 7.7 per cent in the first six months of FY24 is a reflection of the country's strengthening economy and the transformative reforms carried out in the last 10 years. The sentiment has given a boost to Indian equities, which have risen phenomenally after the ruling party’s landslide win in three state assembly elections.

The RBI, in its recent policy outcome revealed last week, said that it sees an increase in private consumption, a strengthening of manufacturing, as well as buoyancy in the services market. Additionally, it sees the drag from external demand to moderate. Amid this landscape, the central bank has painted a positive outlook for the Indian economy, with real GDP for FY24 pegged at 7 per cent.

FII buying: Return of FIIs a big positive

Foreign portfolio investors (FPIs) injected Rs 26,505 crore into the Indian equity markets in the first six trading sessions of this month on expectations of political stability after the BJP stormed to power in three major states and robust economic growth. This came following a net investment of Rs 9,000 crore in October. Before this, overseas investors withdrew 39,300 crore in August and September, data from the depositories showed.

In terms of sector, FPIs have turned buyers into leading banks where they have been sellers. Large caps in segments like IT, telecom, automobiles, and capital goods are also witnessing buying. According to analysts' views, FPI flows will continue in the coming days.

"Global and domestic cues favour the continuation of the ongoing rally in the market despite high valuations. FIIs turning buyers, strong DII inflows, exuberant retail investors, and a thriving IPO market supported by strong economic fundamentals can sustain the rally in the short run, ignoring the high valuations," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, on the market's relentless rally.

Global central banks hint at rate cut

After policymakers are convinced that the US Federal Reserve is done hiking interest rates as inflation in the US slips back to the Fed's target, many analysts believe that the US Fed will begin its rate-cutting cycle as early as next year. This week, several key central banks are scheduled to announce their policy decisions. The US stock futures were trading mixed with Nasdaq and S&P 500 futures, while Dow Jones futures were marginally down after Friday’s trade when US indices gained after stronger-than-expected labour data. 

Asian markets were largely trading in positive territory as a string of major central bank meetings are scheduled this week. Nevertheless, Chinese shares were dragged down by inflationary signals in the economy.

Crude Oil

Amid recessionary fears in the US and China, together with a slowdown in demand, the commodity has been languishing for quite a while. Crude prices rose in Monday’s session as US efforts towards re-stocking the essential commodity’s stock gained some support. Nevertheless, a Brent crude price below $80 per barrel is seen as a positive for Indian equities.

Upbeat primary market

Amid the positive momentum in Indian equities, more than 150 initial public offerings (IPOs) have already been listed on the exchanges. "Notably, a large number of IPOs have also been listed at premium, making this a win-win situation for investors. However, this space needs to be seen with caution, as it remains to be seen if the euphoria will continue in the upcoming election year too, according to the Bank of Baroda’s note on IPO analysis.

Technical factors

Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, said, "The near-term uptrend status of the market remains intact, and present consolidation or minor weakness could eventually result in Nifty resuming its sharp upside further in the short term. The next overhead resistance to be watched is around 21,550 (78.6 per cent Fibonacci extension), and immediate support is at 20,850 levels."