Shrugging off weak global cues, the S&P BSE Sensex and the Nifty50 scaled new lifetime highs in the intra-day session on Monday amid heavy buying in auto, financials and information technology (IT) stocks. The S&P BSE Sensex ended the day at 40,267 levels, up nearly 1.4 per cent, or 553 points. This is the first time ever that it has closed above the 40,000 mark. The Nifty50, on the other hand, surged 166 points to end at 12,088 levels.
Among stocks, HDFC, HDFC Bank, Reliance Industries (RIL), TCS, Infosys and Hindustan Unilever (HUL) emerged as the biggest contributors to the index's gains.
"Indian markets may remain buoyant till the forthcoming Budget is announced in early July (barring unforeseen global negative developments). Post this, it may undergo a period of correction/consolidation," said Deepak Jasani, head of retail research at HDFC Securities in an emailed note.
Here's a look at top three factors that fuelled market rally in today's session:
Rate cut hopes
Given the weak GDP (gross domestic product) numbers released last week, visible slowdown in consumption space as well as liquidity constraints, most market partcipants are betting on a 25 basis point (bps) rate cut by the Reserve Bank of India (RBI) in its upcoming bi-monthly monetary policy meet, which starts tomorrow (June 4). Official data showed Indian economy grew at its slowest pace in more than four years in the fourth quarter (January-March) of the financial year 2018-19 (FY19) of 5.8 per cent. The numbers, which were much-lower-than-expected, have bolstered the view that the central bank will go for an interest rate cut to spur growth.
Two-third of the 66 economists predicted the RBI would cut its repo rate by 25 basis points at its June 4-6 meeting, bringing it to 5.75 per cent - the lowest since July 2010, according to a Reuters poll.
Oil prices tumble
Sentiment also got a boost from the slide in crude oil prices. Oil fell by around 1 per cent on Monday, extending losses of over 3 per cent from Friday, amid stalling demand and as trade wars fanned fears of a global recession. Front-month Brent crude futures were at $61.28 at 12:29 pm. That was 71 cents, or 1.1 per cent, below Friday’s close, Reuters reported. Earlier in the day, Chetan Ahya, chief economist and global head of economics at Morgan Stanley, said recession in the US may begin in nine months if trade war gets any worse. READ MORGAN STANLEY'S VIEW HERE
FPIs continue buying
Overseas investors pumped in a net of Rs 9,031 crore into the Indian capital markets in May on expectations of more business-friendly measures following the BJP's landslide victory in the general elections. Last week, the Bharatiya Janata Party (BJP) won over 300 seats on its own out of 542 seats in the Lok Sabha elections -- the first back-to-back majority for a single party since 1984. The victory of the Narendra Modi-led coalition will ensure continuation in reform measures initiated during the NDA's first term, experts said.