After playing hide-and-seek for the last two months, the magical number of 20,000 was finally seen on Nifty on Monday as investor optimism around India’s leadership at the G20 summit overshadowed worries arising out of crude hitting the $90 mark. Nifty took 36 sessions to cross the previous peak of 19,991.85 and went on to scale the 20,000 mark as well during the session.
Nifty Midcap, Nifty Smallcap, Nifty PSU Bank, Nifty Auto, Metal and Realty indices also hit record highs. Sensex, which ended at 67,127, is still 493 points away from record high of 67,619.
The headline index, which ended in the positive for the seventh straight day, was range-bound in the last few weeks but small and midcap stocks have been hitting record highs.
Dalal Street veteran money manager Nilesh Shah of Kotak Mutual Fund said 20,000 is part of a journey and not a destination. “Sitaron se aage jahan aur bhi hai. Where yesterday Sensex was, today Nifty is. Where today Sensex is, tomorrow Nifty will be there for the long term investors. However in a momentum market one has to be cautious,” he said.
Here are 5 key factors behind today’s rally:
1) G20 Optimism
The G20 Delhi Declaration and India’s diplomatic triumph triggered the continuation of the positive market mood and momentum. “More importantly, the inclusion of the African Union in G20 and the proposed India-Middle East-Europe Corridor have positive economic and market connotations,” said Dr. V K Vijayakumar of Geojit Financial Services.
PM Modi’s announcement of the India-Middle East-Europe Economic Corridor, which will improve India’s rail, and port connectivity with the US, UAE, and Saudi Arabia, led triggered a rally in many stocks. Adani Ports ended 7% higher while rail stocks like IRCON, RITES, IRFC, and RVNL rallied up to 20%.
Stocks related to sugar and ethanol rallied on the announcement of the G20 Biofuel Initiative over the weekend.
Boost in bilateral trades should benefit various segments like pipes and cables. Sectors like railways, shipping, and logistics would be direct beneficiaries of G20 announcements.
2) Support from heavyweights
Today’s buying was led by positive momentum seen in heavyweight Reliance Industries (RIL) and bank stocks. Adani Ports was the top gainer in the Nifty pack and rallied 7%.
Barring media, all major sectoral indices were trading in the green. Nifty Bank, Fin Nifty, Nifty FMCG, and Nifty IT were up around 1% each, while Nifty Auto rallied 1.7%.
3) Retail/DII effect
Both retail and other domestic institutional investors have been pouring money on Dalal Street even as FIIs have been net sellers so far in September. On Friday, DII buying was more than Rs 1,100 crore.
August month data shows that equity mutual fund inflows more than doubled to Rs 20,245.26 crore while SIP contribution stood at an all-time high of Rs 15,813.54 crore.
“What is really impressive about Nifty reaching this all-time high level is that it has been driven mainly by local flows in recent months, while FPI flow has been relatively subdued, partly due to limited global interest in Asia funds given the weak outlook for China which has a very high weightage in the region,” Pratik Gupta, CEO & Co-Head, Kotak Institutional Equities said.
4) Positive macros
The positive mood on Dalal Street is also led by expectations of easing inflation, driven by a decline in vegetable prices. The return of China from deflation, growth in new bank loans, and reduced concerns about US rate hikes have paved the way for the domestic markets to reach new all-time highs, said Vinod Nair of Geojit.
5) Technical factors
On the daily charts, Nifty formed a bullish candle following a breakout from a descending channel that occurred last week. Coming to the OI Data, on the call side, the highest OI was observed at 20,000 followed by 20,100 strike prices while on the put side, the highest OI is at 19,900 strike price.
For trend-following traders, 19,935 could act as a key support level, above which the index could move up till 20,100-20,175. On the flip side, below 19,935, traders may prefer to exit from long positions and below the same, we could see a one quick intraday correction till 19,850-19,825, Shrikant Chouhan of Kotak Securities said.
