What is leading the extended rally in Sensex? Key factors

NEW DELHI: Buying triggered by favourable budget continued on Monday on Dalal Street as benchmark indices regained all losses sustained before Budget in just two sessions, reflecting massive short-covering by bears.

Sensex had lost over 3,500 points in the six sessions before the Budget, but the massive rally on the Budget day, followed by extended gains on the next day lifted the 30-scrip index to the same level. Analysts expect the market to move higher.

“The 5 per cent thumbs-up given by the Sensex reflects the market's resounding approval of the bold reform-growth-orientation of the budget. Like the 1991 Budget which initiated liberalization in India, this budget marks a clear turn to the right in economic policy in India. The stage is set for India to embrace privatization in the right earnest. There are concerns regarding the high fiscal deficit. Also, implementation holds the key in achieving the targets," said Amar Ambani, Senior President and Head of Research – Institutional Equities, Yes Securities.

“The present global liquidity construct and the historically low-interest rate regime favour the continuation of the bull market. So stay invested, particularly in sectors like financials especially private sector banking (PSU banks will give trading opportunities) IT, pharma, autos, cement and segments of FMCG. Domestic cyclicals appear to be strong bets.”

Factors driving markets

• Progress on stimulus front? Top Democrats in the US Senate and House of Representatives filed a joint $1.9-trillion Budget measure on Monday, in a step toward bypassing Republicans on COVID-19 relief before President Joe Biden met with Republican senators.
• Union budget: Proposals of the Union budget were the single biggest factors moving markets. Industry experts and economists lauded the budget but the bond market was scared as yields are likely to rise.

How bluechips are doing
After opening in the green, benchmark indices moved higher. At 11:36 am, BSE flagship Sensex was up 962.81 points or 1.98 per cent at 49,563.42. NSE benchmark Nifty followed, and added 288.65 points or 2.02 per cent to 14,569.85.

In the 50-share pack Nifty, Tata Motors was the biggest gainer, up 7.22 per cent. L&T, UPL, HDFC Bank, SBI, Axis Bank, Bajaj Finance, HDFC, Grasim Industries and UltraTech Cement were among other gainers.

Hero Motocorps was the top loser in the pack, down 1.1 per cent. Reliance Industries and HUL were other losers in the pack.

Broader markets
Broader market indices traded with gains in morning trade, in-line with their headline peers. Nifty Smallcap was up 1.83 per cent while Nifty Midcap added 2.20 per cent. The broadest index on NSE -- the Nifty 500 -- was up 2.15 per cent.

Shriram Transport Finance, Cummins India, Ashok Leyland, Just Dial, Strides Pharma and Equitas Holdings were among major gainers from the space, while HEG Infra, Avanti Feeds, Cyient, Endurance Tech, Emami and Max Financials were under selling pressure.

Global markets
MSCI's broadest gauge of Asia Pacific stocks outside Japan was up 1.25 per cent mid-morning, building on Monday's rise. Hong Kong's Hang Seng Index and China's benchmark CSI300 Index opened 1.7 per cent and 0.33 per cent higher, respectively. Japan's Nikkei 225 gained 0.67 per cent.

South Korea's KOSPI also gained, adding 2.3 per cent, as the country's ruling party readies another round of COVID-19 cash handouts and an extra budget.