Sensex surges to reclaim 39,000 levels as banks lead gains. What analysts say

Indian shares moved higher today after data showed annual retail inflation eased more than expected in August, while small- and mid-cap stocks extended gains from the previous session. The blue-chip NSE Nifty 50 index ended up 0.71% at 11,521.80, while the benchmark S&P BSE Sensex closed 287 points higher at 39,044.

India’s retail inflation of 6.69% in August was lower than a Reuters poll forecast, though it remained above the upper end of the Reserve Bank of India’s (RBI) medium-term target.

The BSE midcap index today rose 0.9% while the smallcap index jumped 1.5%, extending their strong gains to the second day. India’s markets regulator on Friday said multi-cap funds must invest at least 25% each in large-cap, mid-cap and small-cap stocks.

“The impact of SEBI’s circular prescribing higher allocation to smallcap and midcap stocks in Multicap schemes had an effect for the second straight day though to a lesser extent than on the previous day. Selective buying in these stocks continued though their elevated valuations have started to cause concerns among investors,” said Deepak Jasani, Head of Retail Research, HDFC Securities.




The Nifty Bank index ended 1.65% higher today. HDFC Bank Ltd and ICICI Bank Ltd were the top boosts to the Nifty 50, closing 1.2% and 2.2% higher.

Defensive sectors such as IT and pharma also gained, with the Nifty IT index and the Nifty Pharma index closing up 0.63% and 1.93%, respectively.

Broader world markets rose on positive industrial data from China and optimism around COVID-19 vaccines, with investors awaiting the US Federal Reserve’s two-day policy meeting that starts later in the day.

Here is what analysts said on today’s market performance:

Ajit Mishra, VP – Research, Religare Broking Ltd

“The participation of the banking pack is critical for any directional move in the index. Consider the prevailing scenario, we suggest keeping a close watch on the outcome of the US Fed meet for cues.”

Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments

“We did inch towards the 11,550 levels but could not conquer it; it is imperative this happens as that would signal a new impulse rally on the upside. That rally could take us to 11800 and then towards 12000.”

Vinod Nair, Head of Research at Geojit Financial Services.

“Benchmark indices traded sideways in a tight range, before ending the day with a positive bias. Banking and Pharma indices contributed most to the market gains. Global cues were also positive. Domestically, favourable inflation data and expectation of it going down further aided the positivity while the broader markets continued its outperformance today. The markets are almost at the upper end of the trading range and a push above 11600 by Nifty could bring in more trading optimism”.

Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities

“Currently, the index is trading near important retracement level and the texture of the index advocates narrow range activity likely to continue in the next few trading sessions. For the next few trading sessions, 11,450 should be the sacrosanct level, we can expect further uptrend up to 11,550-11,620. However, if it trades below the said levels, would push traders to exit out from their trading long positions.”

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