The markets are on a high today. The Nifty has scaled past 23,100 for the first time after 23 sessions, up over 1% and the Sensex too has joined the party. The Benchmark 30-stock index is up 800 points and is inching closer to the 76,300 mark. What’s particularly heartening is the fact that the rally is not just limited to the large caps. The BSE Small Cap and the BSE Midcap Indices are also up over half a percent each. Titan and Bharti Airtel are the stars of the rally. Tech, select bluechips and auto stocks shine.
“Our markets have been steadily rising for the past four days, with today’s strength primarily driven by short covering above the levels of 23000/75800. A key factor contributing to this short covering is the consistent appreciation of our currency, which has moved from 87.92 to 86.33. This increase has led to a reduction in Foreign Institutional Investor (FII) selling activity in the market. After nearly two months, most traders (FIIs) have partially covered their short positions in the Futures and Options (FNO) segment. Additionally, positive trends in US stock futures and a decline in the 10-year bond yield to 4.24% are also supporting the bullish sentiment,” said Shrikant Chouhan, Head Equity Research, Kotak Securities.
Here are 3 key reasons why the stock market is up today
Fed indicates two rate cuts later this year
Wall Street ended higher on March 19 after the US Fed held interest rates steady and indicated possibility of another half percentage point of rate cuts through 2025. Given the fact that the Fed normally cuts quarter percentage points in one go, this comment from Fed can be interpreted as two potential rate cuts later this year. This cheered investor sentiment across Asia.
China keeps rate steady
Asian markets closed in the positive zone on the back of steady US cues and Fed commentary. Additionally what helped sentiment is the fact that China also held rates steady in sync with the US Fed. PBOC, the Chinese Central Bank highlighted the need to defend the yuan as it faces “downward pressure amid threats of higher tariffs.” Citing risks of trade tariff on China, most analysts believe that the Chinese officials are maintaining a cautious stance. This is also a sentiment positive for India as many market observers see pressure on China as an opportunity for reallocation of global EM funds to India.
Shortcovering in Indian markets
Another key factor contributing to the rally has been the covering of shorts by foreign institutional investors in India. Ajit Mishra – SVP, Research, Religare Broking pointed out that the “Market\s are rallying on the back of shortcovering seen over last 3-4 sessions. FIIs have been covering shorts aggressively in past few sessions. While some consolidation is possible, the overall sentiment is likely to remain positive, favoring a “buy on dips” approach. We are witnessing rotational participation across key sectors, with banking, financials, metals, and energy taking the lead. Traders should position themselves accordingly and remain selective in the broader market.”