Sensex surges nearly 1,000 points: 3 factors driving today's rally
- Sensex rose nearly 1,000 points, closing sharply higher on Friday.
- Three key reasons: global rally, heavy buying in banking and IT stocks, and easing inflation concerns.
- Market breadth was positive, with advances outpacing declines on the BSE.
Indian equity benchmarks rallied sharply on Friday, with the BSE Sensex surging nearly 1,000 points in a broad-based buying spree. The 30-share index closed at 62,987.44, up 997.12 points or 1.61%, while the NSE Nifty50 settled at 18,727.60, gaining 300.35 points or 1.63%.
The rally was driven by a combination of global and domestic factors that lifted investor sentiment across the board. All sectoral indices ended in the green, with banking, IT, and auto stocks leading the charge.
Global cues set a positive tone
Asian markets climbed on Friday after Wall Street hit fresh highs overnight. The Dow Jones Industrial Average and the S&P 500 both closed at record levels, buoyed by strong corporate earnings and hopes that the US Federal Reserve may slow its pace of interest rate hikes.
Japan's Nikkei 225 rose 2.3%, while Hong Kong's Hang Seng index added 1.8%. Korean and Australian markets also traded higher. The positive sentiment spilled over into Indian markets, with foreign portfolio investors turning net buyers after weeks of selling.
Heavy buying in banking and IT heavyweights
Financial stocks were the biggest contributors to the Sensex rally. HDFC Bank, ICICI Bank, and State Bank of India each rose over 2%, while Kotak Mahindra Bank and Axis Bank added 1.5-2%.
IT majors also saw strong demand. Infosys and TCS gained 1.8% and 1.5% respectively, tracking optimism in global technology stocks. Auto shares like Maruti Suzuki and Mahindra & Mahindra also notched gains of 2-3%.
Domestic macro data and earnings boost confidence
India's wholesale price inflation eased to a multi-month low in June, data released after market hours on Thursday showed. The WPI inflation rate fell to 4.2%, down from 5.1% in May, driven by lower prices of fuel and manufactured goods.
Retail inflation data earlier this week also came in below the Reserve Bank of India's upper tolerance band, raising expectations that the central bank may hold rates steady in its next policy meeting. Meanwhile, quarterly earnings from several blue-chip companies have so far beaten estimates, reinforcing confidence in corporate profitability.
The market breadth remained strong, with 2,358 stocks advancing on the BSE against 1,121 declining. The broader midcap and smallcap indices also rose over 1% each.
Going ahead, traders will watch for global central bank commentary and the progress of the monsoon session of Parliament, which could influence near-term market direction.