Reasons behind Sensex's record 72k triumph & 700-point surge

Stock market today

:

BSE Sensex

and Nifty50, the two key Indian benchmark indices ended at all time-highs on Wednesday. Both equity indices touched life-time highs of 72,119.85 and 21,675.75 respectively. While BSE Sensex closed the day at 72,038.43, crossing the 72,000 mark for the very first time,

Nifty50

ended trade at 21,654.75.
The Indian stock markets have been in a bull run, especially post the state election results in early December.

Backed by strong macroeconomic data, positive global cues and the possibility of a stable government post Lok Sabha elections 2024,

Indian markets

have been hitting new highs.
We take a look at some possible factors for BSE Sensex surging 700 points to close above 72,000 for the first time and Nifty50 crossing 21,650 mark:
Global markets

Indian equity markets are gaining positive cues from their global counterparts with the US stocks in particular rallying on hopes of an early rate cut by the US Federal Reserve. Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers told TOI that today’s rally is more a global led rally. “Almost all global markets are high and we also followed the same,” he said.
Global markets witnessed positive closures across Japan's Nikkei, Hong Kong's Hang Seng, and London's FTSE100, recording respective increases of 1.15%, 1.74%, and 0.57%.

Continuing the upbeat trend, Wall Street exhibited gains on Tuesday, with the Dow and S&P 500 rising by 0.4%, while the Nasdaq Composite Index climbed by 0.5%.
Santa Claus rally effect
According to an ET report, an observed seasonal market pattern in late December and early January, appears to be taking effect in the ongoing market scenario. The Nifty has historically demonstrated positive returns during this seven-day period, marking 19 out of 22 years with favorable outcomes.
FIIs
The call to favor a 'Sell China, Buy India’' strategy appears to be amplifying on Wall Street. Foreign Institutional Investors (FIIs) have showcased considerable interest in India, with net purchases amounting to Rs 57,275 crore in December, according to NSDL data. Domestic institutional investors have contributed notably on days when FIIs have been sellers, bridging the gap effectively.
Metal stocks rally
Metal stocks led the Nifty 50 index to achieve a new peak on Wednesday. Anita Gandhi, founder and head at Arihant Capital Markets was quoted by Reuters saying that the robust figures from China, coupled with solid domestic macroeconomic data, are fueling the surge in metal stocks.
The prices of several core metals climbed on Wednesday following reports indicating an uptick in manufacturing activity in China, a leading consumer, last month.

Strong macroeconomic data: CAD
On Tuesday, RBI said that the September quarter witnessed a notable shrink in the

current account deficit

(CAD) to $8.3 billion, approximately 1% of the GDP. This marks a substantial improvement from $30.8 billion (3.8% of GDP) reported a year ago and $9.2 billion (1.1% of GDP) in the initial quarter of FY24.
The betterment in the current account can be attributed to a considerable decrease in the goods trade deficit. The deficit figures stand notably lower than analysts' projections, carrying a positive impact on the exchange rate.
The CAD essentially measures the difference between the exports of goods, services, and transfers, and the total imports of the same.
According to Gandhi of Arihant Capital Markets, the narrowing of the current account deficit bodes well for the economy, suggesting that economic growth is on the right track. Solanki of Anand Rathi also said that yesterday's CAD data has also added to the already positive mood.

Underlying bullish sentiment
The Indian equity markets are among the top 10 best performing stock markets in the world in 2023. Analysts at Kotak Securities have noted an acceleration in capital account flows, expecting the present surge to sustain with the ongoing inclination towards riskier assets.
Rupak De, Senior Technical Analyst at LKP Securities said that the Nifty witnessed a notable surge, supported by a significant buildup of positions by Put writers at 21500. Further strengthening this trend, the daily chart displayed a breakout from a phase of consolidation.
Rupak De highlighted the Relative Strength Index (RSI), saying it signaled a bullish crossover, coinciding with the index situated above a crucial moving average. Looking ahead, there's a potential upside target within the range of 21750-21800, with support anticipated at 21500, De said.
Crude advantage
Stable Brent crude prices hovering around $80 present a significant advantage for India, contributing as a favorable factor amidst broader market dynamics. Wednesday saw a stability in oil prices following the prior day's strong gains, as investors remained vigilant about developments in the Red Sea amid ongoing geopolitical tensions.
Banking on banks
Nifty Bank concluded Wednesday's session with a 1.17% increase, reaching 48,282, while analysts are keeping a close watch on a potential move towards the 49,000-level on Thursday. Observers note that banks, particularly PSU Banks, are displaying strength, with expectations of private banks catching up.
Nifty PSU Bank outperformed, experiencing a 2% rally, with prominent banks like PNB and Bank of Baroda marking gains between 3-4%.