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Sensex tops 32K for first time ever: 5 factors fuelling this rally

NEW DELHI: Benchmark equity indices scaled record high levels on Thursday as soon as the opening bell rang, thanks to a sharp drop in retail inflation in June and dovish comments from US Fed Chair Janet Yellen in her testimony before the US Congress, where she hinted at slower-than-expected rate hikes going ahead.

At 9.25 am, the BSE Sensex was trading 204 points, or 0.64 per cent, higher at 32,009. The index hit an all-time high of 32,020 in opening trade. The Nifty50 was trading 60 points, or 0.61 per cent, higher at 9,876.

Major Asian markets were trading up to 1.2 per cent higher; while the dollar slipped against major global currencies.

Among Sensex stocks, ITC advanced 1.63 per cent to Rs 334. Larsen & Toubro, ICICI BankBSE 1.73 %, Axis Bank and NTPCBSE 0.95 % were up 1.55 per cent, 1.5 per cent, 1.45 per cent and 1.13 per cent, respectively.

Losers included ONGC, which fell 0.37 per cent to Rs 162.25. Analysts are positive on ONGC’s prospects after the acquisition of HPCL. They believe the combined oil behemoth of HPCLBSE 2.42 %, a refining and marketing company, and ONGC will help the combine entity tackle volatility in earnings caused by drop in oil prices, because refining margins tend to increase at such times, ET reported.

So, what has really fuelled the surge in the benchmark indices on Thursday? Going by the buzz on Dalal Street, here is a list of top factors driving the market momentum.

Firm global cues
Asian as well as US markets reacted positively to Fed Chair Janet Yellen’s testimony wherein she indicated that Fed would need to keep raising its benchmark interest rate gradually over next few years, but that rates won’t need to rise to levels seen in the previous cycles. This is a positive for the domestic market too. Asian peers Hang Seng, Nikkei and Shanghai were trading higher by 1.04 per cent, 0.03 per cent and 0.44 per cent, respectively, this morning.

On Wall Street, the Dow Jones Industrial Average index hit an all-time high after Yellen said the US economy was strong enough to absorb gradual rate increases over the next few years.

HDFC Securities noted that the statement eased some of the rate hike concerns that surfaced last week, following the release of the FOMC minutes from June meeting that initially gave an impression that the Fed may press ahead with rate tightening, despite the persistence of below-target inflation data.

Sustained FII inflows
Unabated inflows by foreign portfolio investors continued to support domestic equity markets. They have pumped over Rs 1,50,000 crore into the domestic markets since January 2017 on several factors, including expectations of accelerated pace of reforms. FPIs had invested around Rs 7,500 crore during the corresponding period last year.

Forex reserves at record high
India’s foreign exchange reserve touched a new record high of $386.539 billion after it rose by $4.007 billion in the week to June 30, due to an increase in foreign currency assets (FCAs), the RBI said on Friday. In the previous week, the reserves had surged by $576.4 million to reach $382.53 billion.

Cooling inflation paves way for rate cut
The country’s annual retail inflation eased in June to its slowest pace in more than five years, as food prices fell, building pressure on the central bank to cut interest rate when it meets for a monetary policy review on August 2.

Technical factors
Pattern analysis showed the Nifty50 is moving past the resistance of a rising trend line successfully after a brief breach on the downside. Milan Vaishnav, CMT, Consultant Technical Analyst, Gemstone Equity Research & Advisory Services, said: “This rising line will continue to act as support for the market in the immediate short term. We will see buoyancy during the session on Thursday, but it is recommended that one should approach the market with caution and each fresh purchase should be monitored in a vigilantly.”