Sensex Hits 28,000 for First Time: Five Things to Know About This Record Rally.The Sensex rallied to record highs for the fourth consecutive day to hit 28,000 for the first time on Wednesday. The Nifty too set a new peak by rising to 8,363.95. Indian stock markets have now gained over 7.5 per cent, or nearly 200 points, in the last 12 trading sessions and bulls seem firmly in control of the Dalal Street. Indian markets shed some early gains in afternoon trade on profit-taking. At 12:30 pm, the Sensex was up 33 points to 27,893 while Nifty was up 10 points at 8,333.
Here are five reasons why Sensex jumped over 7.5 per cent in the 12 sessions:
- Renewed expectations of a rate cut as early as in December have given fresh legs to the rally. The continuous slide in global crude prices and diesel decontrol (announced earlier this month) are likely to have a big impact on easing inflation in the coming months. This also means greater pressure on the Reserve Bank to cut rates. Finance Minister Arun Jaitley in an interview also favoured a rate cut.
- Banking stocks have outperformed in this rally on hopes of earlier-than-expected rate cuts from the RBI. The banking shares index, Bank Nifty, gained nearly 11 per cent, in the past 12 sessions, outperforming the broader markets. The Royal Bank of Scotland on Monday said economic indicators like softening of inflation suggests that key interest rates could be slashed sooner than later by the Reserve Bank of India. “I think the indicators seem to suggest that rate cut would be sooner rather than later,” said RBS country executive Brijesh Mehra.
- Domestic equities have also got a boost from Bank of Japan’s stimulus announcement on Friday. Analysts say BoJ’s move will ensure the steady flow of overseas investments into Indian equities at a time when the US Federal Reserve has put an end to its six-year-old monetary stimulus. The European Central Bank is also expected to announce some stimulus measures to perk up the Continent’s economy.
- Foreign investors are back to buying domestic stocks after a brief selling in early October. So far this year they have bought Indian shares nearly $14 billion (Rs. 84,000 crore at $1 = Rs. 60 rupee). Overseas investors bought Indian shares worth Rs. 1,413 crore on Monday, buying for a fourth straight session.
- The current market rally is co-terminus with the announcement of reform measures such as diesel control. Energy reforms have been followed by incremental reforms in other sectors. Recently, the government announced the opening up of the coal sector and also eased norms for foreign direct investment in the construction sector. (With Agency Inputs)