In last-hour rally, Nifty and Sensex hit lifetime highs

Indian stocks gained momentum in the final hour of Thursday's trade, pushing the major indices to new historic highs. The Sensex crossed the 83,000 mark for the first time in trade reaching 83,020 points, while the Nifty 50 hit a record high of 25,433 points, edging closer to the 25,500 level.

The rally was driven by banking and IT sectors, with additional support from the auto pack, propelling the frontline indices to new record fresh milestones. Heavyweight stocks like Reliance Industries, Bharti Airtel, HDFC Bank, Infosys, and ICICI Bank collectively added 171 points to the Nifty 50, accounting for 38 percent of its total 470-point surge today.

Second record high this month

This marked the second record high for the index this month so far. Of the 50 index constituents, 49 closed in the green, with Hindalco leading the gainers at a 4.5 percent rise. Bharti Airtel, NTPC, Shriram Finance, Mahindra & Mahindra, JSW Steel, Eicher Motors, ONGC, Adani Ports & SEZ, Wipro, and Grasim Industries followed, posting gains between 3 percent and 4.5 percent.

Against this backdrop, the Nifty 50 closed the session with a 1.89 percent gain, ending at 25,388.90 points. Similarly, the S&P BSE Sensex finished at 82,962 points, up 1.77 percent from the previous close. Today's rally turned both indices positive for the month, with the Nifty 50 up 0.7 percent in September and the Sensex gaining 0.72 percent over the same period.

5 key reasons for today's sharp rally

The following are the five key reasons listed by experts for the sharp rally observed in the final hour of trading:

Comfortable US CPI data

The data released on Wednesday showed that the US consumer price index increased by 0.2 percent in August, consistent with July's rise. However, when excluding the more volatile food and energy sectors, the core CPI rose by 0.3 percent, up from the previous month's 0.2 percent gain.

As a result, traders have largely discounted the likelihood of a 50-basis point rate cut on September 18, reducing its probability to 15 percent. Instead, there is an 85 percent chance of a 25-basis point cut. Despite this, markets still anticipate a total of 104 basis points in cuts by the end of the year, indicating expectations for a 50-bp reduction at either the November or December meetings.

Seema Srivastava of SMC Global Securities said, "After the comfortable US CPI data, the Indian market investors have been waiting and watching since morning dealing. As no strong selling was witnessed during the Thursday deals, bulls strongly responded during the closing bell." 

The China boost

Arun Kejriwal of Kejriwal Research and Investment Services said, "The market is strongly responding to the Chinese rate cut buzz as it is expected to boost demand in the real estate and commodity market. So, this last-hour bounce in the Indian stock market should only be seen from this angle."

Narendra Solanki of Anand Rathi Shares and Stock Brokers said, "The Indian markets opened in the green on the back of positive Asian markets buoyed by a tech-fuelled rally on Wall Street overnight during the afternoon session. The markets further gained strength on news of China cutting rates by 50 bps on $5 trillion mortgages as soon as this month to boost consumption came out ahead of a European Central Bank (ECB) policy meeting later in the day; providing much needed sentimental boost to the markets," Mr Solanki said.

Steady buying by FPIs

Foreign Portfolio Investors (FPIs) have continued to be net buyers in the Indian stock market over the past three sessions. This follows an investment of nearly ₹11,000 crore in the first week of the current month, driven by the resilience of the Indian market and expectations of an interest rate cut in the US.

In the last three sessions alone, FPIs added ₹5,319 crore to their investments. This sustained buying spree has been bolstered by improved market sentiment, particularly after recent remarks from US Federal Reserve Chair Jerome Powell, who indicated that a rate cut could be forthcoming.

Possible rate cut by European Bank

The European Central Bank (ECB) is anticipated to lower its rates by 25 basis points on Thursday, marking the first reduction since June when the possibility of a cut in September was still considered highly likely. Currently, the ECB's main interest rate stands at 3.75 percent, reflecting the impact of several years of substantial rate increases.

The ECB’s meeting comes just days ahead of the US Federal Reserve’s September 17-18 meeting, at which it’s expected to begin its own rate-cutting cycle.

Vinod Nair of Geojit Financial Services said, “The bulls took charge towards the end of the day and lifted the indices to a new high, mirroring the bullish global trend. The rate-cut optimism across the globe (ECB & US Fed) has provided a positive impetus to the global market. The subsequent leg of the rally will be influenced by the outcome of domestic inflation and IIP data while the corporates core earnings are forecast to improve in Q2 on a QoQ basis.”

Technical factor

According to Rupak De, "The Nifty has broken out of its recent consolidation on the daily chart, indicating a rise in optimism. Additionally, the index has been sustaining above the critical 21-day EMA, a near-term moving average. The RSI on the daily chart shows a bullish crossover, reinforcing the positive sentiment."

The trend is expected to remain strong, as the index closed above the recent consolidation high, he said. On the upside, the rally could potentially continue toward the 25,470–25,500 range, while support is seen at 25,100.

(By arrangement with livemint.com)