The headline benchmark indices - Sensex and Nifty - turned positive on October 8 amid a weak trend in the Asian markets rising by half a percent by noon, driven mostly by gains in the banking and energy sectors.
At 12:40 pm on October 8, the 30-share BSE Sensex climbed 393.31 points to 81,443.31, while the NSE Nifty went up 137.05 points to 24,932.80.
The upmove in the domestic market was witnessed after six consecutive sessions of decline due to FII outflows and geopolitical tensions. Here is a list of 5 factors that led to the uptrend in the market.
1) Assembly Election Results: The ruling BJP has comfortably crossed the majority mark in the Haryana assembly and was leading at 49 seats paving the way for a likely historic third consecutive term. The victory comes even as multiple exit polls had predicted a Congress victory in Haryana. Market has reacted positively to the outcome on policy continuity.
2) Expectations of Rate Cut Tomorrow: RBI's monetary policy committee will announce the benchmark interest rate on October 9 after three days of meeting. Market is hoping for an interest rate cut on October 9 after the US Federal Reserve initiated monetary easing cycle with a 50 basis points (bps) cut. All the financial stocks have advanced on hope of a rate cut. At the time of publishing, Bajaj Housing Finance shares were locked in upper circuit of 10 percent, HUDCO was up 6 percent and PNB Housing Finance was trading 0.36 percent higher, while HDFC Bank was trading over 2 percent higher.
3) Uncertainty in China: A stock market rally in China lost steam after a much-anticipated announcement on measures to revive the country's struggling economy left investors disappointed. Shares had surged by over 10 percent when trading resumed following the Golden Week holiday, but they retreated after a press conference by the nation's economic planners. In a volatile trading session, Hong Kong's Hang Seng Index was down by more than 7 percent, while the Shanghai Composite Index in mainland China saw a gain of around 4.59 percent by the afternoon session.
4) Nomura India Strategy: The analysts are bullish on India story even after recent FIIs pulling. In a recent note, Nomura said "We do not think that the recent drop signifies a long-lasting period of underperformance for Indian equities." The structural story of India remains attractive and should valuations revert to more palatable levels, investors will look to re-enter the market, it added.
5) Brent crude eases: Crude oil prices have given up some of their recent gains, which were driven by rising geopolitical tensions in the Middle East. Earlier, Brent crude held steady above $80 per barrel, marking its highest level in months. However, fears of a broader conflict appear to be easing, with Israel's actions so far confined to Lebanon.
Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services noted the Indian market is relatively stable, though weak. A significant fact is that the underperformance is India-specific since the US, Europe and other emerging markets are stable.
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