Markets rise for 3rd day on global cues
Mumbai: Benchmark Indian indices rose for the third straight session on retail and DII buying, buoyed by falling US treasury yields and the dollar, which have ignited a risk-on sentiment again in global financial markets, what some analysts say could be the start of an early Santa Claus rally. The key risk to the rebound from lows is a widening of the West Asia conflict, which could upend the global markets rally, say market veterans.
The Nifty and Sensex gained nine-tenths of a per cent each at 19,411.75 and 64,958.69 while the Nifty small cap 250 jumped 1.07% to 12,384.35 while the Nifty Midcap 150 rose by 0.9% to 14,953.75.
While FPIs sold a provisional ₹549 crore, DIIs net purchased ₹595.7 crore, implying that retail direct investors also chipped in significantly to Monday’s rally.
The sentiment turned after 1 November when the Fed kept a key interest rate unchanged for a second time since September, after hiking it from near zero last March to 5.25% through July this year .
The US 10-year treasury slipped from 4.73% on 1 November to 4.59% intraday 6 November while dollar index which measures the dollar against a basket of six currencies fell 1.85% to 104.90 intraday 6 November over the same period. “The Indian markets are being driven by the risk-on in the global markets following a dovish pause by the Fed, reinforced by weak jobs data in October, which could well be the beginning of an early Santa Claus rally,” said Andrew Holland, CEO, Avendus Capital Public Markets Alternate Strategies. “The weak jobs report takes pressure off the Fed to hike again in December and raises expectations of interest rate cuts next year, which the markets could begin pricing in. This will result in short-covering in equities and bonds, which we are seeing in India, too.”
FPIs sold shares worth ₹24,548 crore last month , the most in nine months and raised cumulative net bearish bets on index futures to a near record high of 175,698 on 2 November , the most since the 196,378 contracts they net sold on 22 March. To be sure, they cut the shorts to 162,694 contracts on 3 November. Data for 6 November wasn’t uploaded by NSE till press time. Further short covering could push the market higher.
Of all the broader market indices , the Nifty Smallcap 250 has outperformed the benchmark having fallen just 1.64% from its record high of 12590.45 on 18 October to 12384.35 on 6 November . This contrasts the Nifty’s 4% fall from a record high of 20222.45 on 15 September to 19411.75 on Monday and the Nifty Midcap 150’s 4.14% fall from a record high of 15599.05 on 15 September to 14954 most recently.
The Smallcap index outperformance has been led by BSE , which is up 26% between 18 October and 6 November to ₹1863.25. Angel One , Jindal Saw , Suzlon Energy and CreditAccess Grameen which gained between 22 and 25% were the other gainers .
“The Smallcap outperformance could continue but I expect the bounce in Nifty to be limited to another 150-200 points,” said Abhilash Pagaria, head, Nuvama Quantitative & Alternative Research.
Deven Choksey, Managing Director of KR Choksey Shares and Securities, expects the Nifty to range between 18800-20000 in the near term .
Indeed on Monday the Nifty broke a key resistance of 19367 , which is the 38.2% Fibonacci retracement of its fall from the record high of 20222.45 on 15 September to the low of 18838 on 26 October . The next resistance which coincides with the 61.8% retracement is around 19700.
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Updated: 06 Nov 2023, 11:01 PM IST
