The stock market saw a bullish uptrend with a strong buying interest on Thursday 23rd May, which took the bench mark indicies on an all time high breaking previous resistance levels. The SENSEX saw an uptick of 1,279 points to hit an all-time high of 75,500.
The broader NSE Nifty index surged over 396 points, reaching a new record high of 22,994. This significant rise in the domestic stock markets led to an increase of approximately Rs 4.1 lakh crore in the BSE market capitalization (m-cap).
The Sensex opened at 74,253.53, up from its previous close of 74,221.06. During the session, it surged by 1.7 percent to reach a new record high of 75,499.91. The index closed 1,197 points, or 1.61 percent, higher at 75,418.04, with 27 of its stocks finishing in a bullish trend.
The market experienced widespread buying, with the BSE Midcap and Smallcap indices also reaching new record highs. The BSE Midcap index hit 43,442.47, while the BSE Smallcap index reached 48,229.33 during the session.
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Buying interest in key heavyweights like HDFC Bank, Reliance Industries Ltd, ICICI Bank, Larsen & Toubro (L&T), and Axis Bank drove the indices higher. A total of 222 stocks, including Bharti Airtel, Mahindra and Mahindra, Ashok Leyland, Eicher Motors, Tata Steel, Adani Enterprises, and Adani Ports, reached new 52-week highs during intraday trading on the BSE.
Key Factors That Drove The Bulls
Stablizing Election Jitters – As the elections draw to a close, investors are eager to capitalize on the strong bullish trend in the market. Investors are keen on securing their investments with strong bullish and high-quality stocks as there are chances of a stable government being elected.
“The Nifty hitting a new record is the market’s message of political stability after the elections. The rally is healthy since it is led by fairly valued large-caps,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
According to Bernstein, the Indian stock market could experience a short-term rally either leading up to the Lok Sabha elections or in the week following the results. This rally might propel the Nifty 50 to surpass the 23,000 mark. However, it’s anticipated that this short-term surge could be followed by profit booking.
The Macro Economic Impact- The market sentiments have recieved a boost after the RBI had announced a record ₹2.11 lakh crore dividend. This development is positive as it will assist the government in managing its fiscal deficit target.
“The biggest positive for the market is the record ₹2.11 lakh crores dividend from the RBI to the government, which will give an additional 0.3 per cent of GDP fiscal room for the government. This means the government can reduce its fiscal deficit and step up infrastructure spending,” said Vijayakumar.
Banking Behemoths Lead The Way– The top banking firms have been at the helm of driving this uptick, as they carry most of the wieght in the benchmark indicies their contribution towards the bullish trend remains significant.
HDFC Bank, ICICI Bank, and Axis Bank stood out as prominent contributors to the gains in both the Sensex and the Nifty 50 index. This surge followed a notable decline in India’s 10-year bond yields subsequent to the RBI’s substantial dividend payout to the government.
“Bond yields have declined sharply, reflecting lower government borrowing. The decline in bond yields is positive for banking stocks,” said Vijayakumar.
Domestic Investment Increased- The bullish upturn in the market has been largely attributed to domestic institutional investors (DIIs), who have been actively driving the momentum. Conversely, profit booking from Foreign Institutional Investors (FIIs), as they divest from their stocks, has been observed. The data indicates that until May 22, domestic institutional investors (DIIs) purchased Indian stocks worth ₹38,331 crore in the cash segment. In contrast, Foreign Institutional Investors (FIIs) have sold stocks worth ₹38,186 crore in cash since the beginning of this month.
Technical Analysis- Another significant factor contributing to this uptrend is the breaking of previous resistance levels, coupled with many stocks surpassing their 52-week highs.
Soni Patnaik, Assistant Vice President of Equity Derivatives Research at JM Financial Services, highlighted that the Nifty 50 surpassed the crucial resistance level of 22,800+ during the weekly expiry today. He suggested that from current levels, there’s potential for it to advance towards the 23,000 mark by the month-end expiry.
“Aggressive put options writing can be seen from the base of 22,500 PE to all the way till 22,800 PE, forming a strong support base at 22,600/22,700 levels now,” said Patnaik.
Ajit Mishra, Senior Vice President of Research at Religare Broking, suggests that the Nifty 50 is targeting the 23,100-23,400 zone, with the 22,600-22,800 zone likely to offer support in the event of any pullback.
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