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The Indian stock market indices, Sensex and Nifty, witnessed a significant climb of nearly 1% each on Monday, mirroring the bullish trend observed in Asian markets. This surge was primarily driven by China's pledge to substantially increase its debt, despite the lack of clarity regarding the overall stimulus package. This move, combined with the optimism surrounding a potential interest rate cut by the Federal Reserve in November, fueled positive sentiment among global investors. Additionally, the US stock market had already experienced an upward trajectory on Friday, spurred by hopes of the Fed's rate reduction and strong bank earnings. A decline in crude oil prices further improved market sentiment, reducing the burden on businesses and consumers.
The BSE Sensex closed the day at 81,945.68, up 564.32 points or 0.69%, while the NSE Nifty ended at 25,113, gaining 148.75 points or 0.6%. Several prominent stocks, including Tech Mahindra, Larsen & Toubro, HDFC Bank, Kotak Mahindra Bank, and ITC, witnessed gains of up to 3%. The Nifty's 50-Day EMA, positioned at 25,050-25,080, acted as a significant barrier. However, the index breached this level during the day, reaching a high of 25,159.75. Brokerage firm Angel One highlighted that a decisive breakthrough above this level would be crucial in accelerating the bullish momentum towards higher levels. The firm also pointed out an intermediate resistance zone centered around 25,250-25,300, coinciding with the 20-day EMA. A strong breakthrough at this level could potentially trigger the next phase of the rally from a positional perspective. On the downside, the recent low of 24,800-24,700 is expected to offer robust support, mitigating any potential setbacks.
Despite the positive market performance, concerns remain regarding valuations of Indian equities, particularly small and mid-cap companies. These segments are currently trading at significant premiums compared to their long-term averages. However, Motilal Oswal Private Wealth believes that sustained inflows from domestic institutional investors (DIIs) and strong corporate fundamentals will act as a protective force, cushioning domestic equity market valuations against the backdrop of geopolitical events and foreign institutional investor (FII) outflows. The firm also suggests moderating expectations on earnings growth, given four consecutive years of double-digit growth. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, anticipates IT and banking stocks to remain resilient, driven by expected robust Q2 numbers. However, he sees limited potential for the market to experience a sharp upward movement from this point forward. He cited downgraded FY25 earnings expectations by most analysts, the uncertainty surrounding the US presidential elections next month, and geopolitical tensions in the Middle East as factors that could weigh on market performance.
Source: Stock market today: Why Sensex, Nifty are rising today