Sensex vaults 724 points, Nifty settles at 12,120; 5 key factors behind market rally

India’s Key equity indices made sharp gains on November 5, with the 30-share pack Sensex vaulting 724 points and the Nifty hitting 12,100 on the upside.

The Indian market witnessed a gap-up opening, tracking global cues amid reports of a likely gridlock in Washington.

Democratic candidate Joe Biden was leading Republican nominee President Donald Trump in terms of electoral college votes. Biden was inching towards the 270-mark as Trump cried foul.

The result of the US presidential election is hanging on the vote count in a handful of key states, with the race too close to call.

Sensex closed 724.02 points, or 1.78 percent, higher at 41,340.16 and the Nifty finished 211.80 points, or 1.78 percent, higher at 12,120.30.

BSE midcap and smallcap indices closed 1.74 percent and 1.70 percent up, respectively.

Here are the top 5 factors that pushed the market higher:

Strong global cues

Indian equities rose in sync with gains in major global peers. USA’s Nasdaq and S&P 500, Japan’s Nikkei, China’s Shanghai Composite Index and Korea’s KOSPI logged strong gains.

Asian share markets firmed on November 5 while bonds held big gains as investors awaited a clear result from the US elections, with the likely prospect of policy gridlock seemingly warmly welcomed by Wall Street.

As per Reuters, investors who met news of likely gridlock in Washington with a large-scale unwinding of bets on a Democratic sweep weighed prospects for big stimulus measures while cheering fading expectations of higher taxes and new regulations.

Rally in IT, bank heavyweights

Some IT and bank heavyweights, including Infosys, TCS, State Bank of India, HDFC Bank and HCL Tech, were among the top contributors towards Sensex’s gains.

While IT stocks rose as the dollar strengthened against its global peers, bank stocks witnessed traction after a strong Q2 show by SBI.

Improving macro

Investors took note of the improving macro scenario in the country. Activity in India’s dominant services industry expanded for the first time in eight months in October as demand surged.

The Nikkei/IHS Markit Services Purchasing Managers’ Index climbed to 54.1 in October from September’s 49.8. It was the highest reading since February and comfortably above the 50-mark separating growth from contraction.

Foreign fund inflow

Data available with NSDL shows that foreign portfolio investors (FPIs) have been net buyers, so far, since October.

After pumping in Rs 21,826 crore in October, FPIs have invested Rs 3,188 crore in November, NSDL data showed.

FPIs bought shares worth Rs 146.22 crore in the Indian market on November 4, as per provisional NSE data.

Technical factor

The overall structure shows that the index is moving from the lower end of the short-term range to the upper end, which is near 12,000.

“Multiple parameters like the upper channel line, October high and the daily upper Bollinger Band are present near 12,000-12,025, which makes it a crucial area to keep a tab on. Any minor dip is likely to find support near 11,750-11,800,” said Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas.

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