Sensex zooms 700 points! Top 4 factors that could be powering rally on D-Street

Bulls took control of D-Street on Thursday, pushing the S&P BSE Sensex higher by 700 points, while the Nifty is back above 17700 levels. The benchmark indices are surging on multiple fronts and there are largely 4 factors that could have led to this upswing. What are the factors that are driving the Indian markets during today’s trade, let's check one by one:

US Fed Reserve (FOMC)

The biggest trigger for the Indian markets is considered to be the support from the US markets and somewhat from the Asian markets, especially Japan’s Nikkei. Amid the US Federal Reserve policy decision on Wednesday to keep interest rates steady, the US markets ended on a higher note, with almost all the three US primary indices Down Jones, Nasdaq, and S&P 500 closed over 1 per cent higher.

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“The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain,” US Fed Reserve said in its statement on Wednesday.

Evergrande Clarity

Similarly, the clarity from the Evergrande crisis is quite visible, as Asian shares made cautious gains on Thursday, supported by some positive news from cash-strapped developer China Evergrande Group. 

It was expected that the Evergrande issue could have a ripple effect on the banking system in China and also on overall global markets, including India. Evergrande was the major trigger Indian markets witnessed severe sell-off in the metal stocks and the market had free fall earlier this week.

To avoid the spillover effect on banks and property firms from the Chinese developer Evergrande, the People's Bank of China on Wednesday injected 90 billion yuan ($13.9 billion) into the banking system of the country.

"We are of the view that any negative sentiments towards China would always be beneficial to India. Coming to the Impact of Evergrande, we believe the impact would be minimum as China is a closed economy and the crisis is a country-specific crisis," Ashish Chaturmohta, Director Research, Sanctum Wealth, said.

"Hence, China would surely solve the problem before it becomes worst. In the current situation, markets are at peak and any corrections would be an opportunity to enter and build a portfolio," he said.

Hawkish view of the Federal Reserve and clarity on Evergrande are the two major global triggers fuelling the surge in the Indian markets on Thursday. 

Realty Stock Rally

Meanwhile, the opening up theme, economy revival, and declining covid cases are the domestic factors aiding the Sensex and Nifty50 to grow. Realty, Hospitality, and Entertainment stocks have become the most beneficial sectors due to these multiple triggers.  Of all the benefitted sectors. Realty stocks is powering more strength to the Indian markets on the back of a strong outlook. Moreover, the majority of the lenders coming out with home loan rate cuts as a festive offer, had not just only helped the banks and financials to pick up the business but it is also creating an opportunity for the realty sector.

In the last four sessions, the BSE Realty Index has gained around 20 per cent, and has touched a new 52-week high to 3858 levels surging for around 5 per cent on Thursday. The surge in the index is mostly led by Godrej Properties up near 9 per cent to hit a new record high on the BSE intraday today.

Technical Check

The Nifty50 climbed 17700 levels supported by gains in Realty, banks, finance and metal stocks. The level of 17650 acted as a stiff resistance for the index in the recent past.

“Nifty remains in a medium-term uptrend for targets of 18000 and above; any meaningful correction is a good opportunity to buy. Support for the September series is seen at 17325 while resistance is expected at 17600-17700 levels,” Sahaj Agrawal, Head of Research- Derivatives at Kotak Securities, said.

“Breach of 17325 on the closing basis is expected to result in selling pressure to sub 17000 levels. Auto and Energy stocks trade with a positive bias while Metals are expected to consolidate before resuming uptrend,” added Agrawal.