Indices gains nearly 2%, here are 5 factors that powered the rally

The benchmark indices started the week on a strong note and ended the day 2 percent higher, with Sensex rising 848.18 points, or 1.74 percent, to 49580.73 and the Nifty gaining 245.40 points, or 1.67 percent, to close at 14923.20 on May 17.

Among sectors, Nifty energy, bank, auto, metal and PSU bank indices rose 1-4 percent. BSE midcap and smallcap indices added 1.6 percent each.

“The markets have zoomed past a resistance block of 14,850 and this should keep the Nifty bullish. Strong support lies at 14,700 and the index would turn bearish if we break this level on a closing basis. If the Nifty can keep above 14,850, we can claim higher levels of 15,000 and then 15,200. If we break 14,700, the markets could fall further to 14,400,” said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments.

IndusInd Bank, SBI, ICICI Bank, HDFC Bank and UPL were among the top gainers on the Nifty. Losers included Cipla, Bharti Airtel, Larsen and Toubro, SBI Life Insurance and Nestle India.

Stocks & sectors

On the BSE, power, realty, auto, banks and auto indices rose 1-4 percent.

Among individual stocks, a volume spike of more than 100 percent was seen in Balkrishna Industries, Federal Bank and Colgate Palmolive.

A long buildup was seen in Balkrishna Industries and Trent, while a short buildup was seen in Escorts, Voltas and Cummins.

More than 250 stocks, including UPL, Gammon Infra and KPIT Technologies, hit a fresh 52-week high on the BSE.

Five key factors that could have led to the market rally:

1. Positive global cues

US markets ended higher on gains mainly in technology stocks amid value buying and release of macroeconomic data. Asian markets, however, ended on a mixed note.

2. Better earnings

The current market rally was supported by the better earning from India Inc. Pharma major Cipla, FMCG giant Colgate-Palmolive and private lender Federal Bank posted healthy numbers for the quarter ended March 2021.

3. Decline in coronavirus cases

India’s reported 2,81,386 fresh cases in the last 24 hours, the lowest in 27 days, while the death toll climbed to 2,74,390 as 4,106 more people succumbed to the disease, the health ministry’s May 17 data showed.

The national recovery rate has improved to 84.81 percent. In Maharashtra, the worst-hit state the number of fresh cases at 34,389 remained below 40,000 for the third consecutive day.

4. Strong gains in banking stocks

Bulls ruled the banking stocks and the Nifty Bank index gave its highest daily close in the last 10 trading sessions.

It outperformed the broader market and closed with massive gains of around 4 percent. It formed a strong bullish candle and negated the lower top-lower bottom formation of the last three sessions.

IndusInd Bank, SBI, ICICI Bank, HDFC Bank and Axis Bank were among the top contributors to the rise of the Sensex.

5. Technical View

The Nifty formed a healthy bullish candle on the daily scale and negated its formation of lower highs-lower lows of the last three trading sessions.

“The Nifty has to hold above 14,900 zones to witness an up move towards 15,050 then 15,150 zones, while on the downside, support exists at 14,700 and 14,600 zones,” said Chandan Taparia of Motilal Oswal Financial Services.