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Sensex rises 1,100 pts, Nifty tops 25,100: What's driving market rally?
On BSE, Bharti Airtel, Mahindra & Mahindra (M&M), Power Grid, Nestle and Reliance Industries were among the top gainers rising up to 3 per cent.
On NSE, Trent, Jio Financial Services, M&M, Bharti airtel and Nestle were among the top gainers, rising up to 4 per cent.
Why are Nifty and Sensex rising in trade today?
US President Donald Trump has reportedly stated that he will decide within the next two weeks whether America will intervene in the Israel-Iran conflict. Overnight, Israel targeted nuclear sites in Iran with airstrikes, while Iran launched missiles and drones at Israel. The week-long conflict has escalated, with no clear resolution in sight from either side.
According to G Chokkalingam, Founder, Equinomics Research, Trump's comment is positive for markets as the US is not expected to intervene in the war amid international pressure.
"He may not go for direct conflict because of the international pressure which is positive for the Indian market," said G Chokkalingam.
Crude oil prices ease
As the White House delayed a decision on US involvement in the Israel-Iran conflict, oil prices corrected over 2 per cent which according to G Chokkalingam also boosted market sentiments.
Last checked, Brent crude futures fell $2, or 2.5 per cent, to $76.85 a barrel.
China keeps interest rate steady
The People's Bank of China (PBoC) decided to keep its benchmark lending rates unchanged today as the trade agreement with the US helped alleviate some concerns about economic growth.
The PBoC maintained the 1-year loan prime rate (LPR) at 3 per cent and the 5-year LPR at 3.5 per cent, according to reports.
This, according to Kranthi Bathini, director-equity strategy, WealthMills Securities pushed the Chinese markets higher which also had a positive impact on Indian equities.
At the last count, mainland China's CSI 300 was up 0.09 per cent and Hong Kong's Hang Seng was up 1.26 per cent.
RBI eases norms for new project finance loans
A major contributor to the rally in Indian equities was buying in Public Sector Undertaking (PSU) Banks. Last checked, Nifty PSU Bank was up 1.59 per cent, where out of 12 stocks, 11 advanced. Among others, Punjab National Bank (PNB), Union Bank, Canara Bank, and Indian Overseas Bank were among the top gainers. The surge came after the Reserve Bank of India (RBI) issued its final guidelines on project finance loans.
The central bank has directed lenders to set aside 1 per cent of the value of loans for under-construction infrastructure projects to cover potential losses, easing its earlier draft proposal that envisaged provisioning rising up to 5 per cent, following an appeal by lenders. The requirement will come into effect on October 1.
"RBI's decision to reduce provisioning on infrastructure loans is a major reason contributing to the bullish sentiment in the market," said Vishnu Kant Upadhyay, AVP - research & advisory, Master Capital Services.
Sensex rebalancing
According to Nuvama Institutional Equities, Sensex rejig can push the market upwards. "Historically, Sensex inclusions tend to see intraday upmoves, supported by stronger volumes, and a similar trend could play out this time as well."
Tata Group-owned Trent Ltd and Bharat Electronics Ltd (BEL) are expected to be included in the benchmark 30-stock BSE Sensex index which are likely to bring inflow of $708 million.
Trent is expected to see an inflow of $330 million, while the aerospace and defence electronics company BEL could see $378 million in inflows, according to Nuvama estimates.
Technical view
If Nifty is able to sustain the sentimental level of 25,000 level, we can see the momentum to accelerate further, but 25,000 level is the level to watch in the medium to short term," said Bathini.
"Nifty is currently trading above all its key moving averages, indicating a positive undertone. The initial bias looks positive with a potential upsurge towards 25,200 which if broken decisively will take such a rally further higher towards 25,500-25,800. On the downside, the 24,600–24,500 zone is expected to act as immediate support. Any decline towards this range may offer a favourable opportunity to initiate fresh long positions," said Kant.
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