Pre-Budget rally? D-Street investors richer by nearly Rs 3.5 lakh crore: 8 factors

NEW DELHI: In what could be the beginning of a pre-Budget rally coinciding with the beginning of the Q3 earnings season, the domestic equity indices on Monday reversed last week's losses amid favourable global cues. The Sensex rallied over 900 points to cross the 60,800 mark and the Nifty crossed the 18,100 level.

Today's rally left Dalal Street investors richer by Rs 3.45 lakh crore as the market capitalisation of all BSE-listed stocks rose to Rs 283.2 lakh crore. (Tax breaks, jobs or plan to beat China: What will Budget 2023 offer? Click to know)
Analysts say that barring the sell-off by foreign institutional investors or FIIs, which offloaded Indian stocks worth nearly Rs 5,900 crore last week, all signs are bullish.

Here are 8 key factors charging the bull run on Dalal Street today:

1) US macro data
Following a benign blend of solid US payroll gains and slower wage growth, combined with a sharp fall in service sector activity, analysts are now expecting the US Fed to increase interest rates by 25 basis points in the February meeting as the economy is on the slower path after aggressive rate hikes in 2022.

2) Bond yields
The 10-year US yield fell 15 basis points and was at 3.56%, while the two-year yield slumped 19 bps and was at 4.26% amid hopes of a slower pace of rate hikes by the US Fed.

3) Global markets
After Friday's overnight rally on Wall Street, Asian markets too were buoyant today, with China's reopening of its borders adding to the optimistic mood on Dalal Street.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 2.0% to a five-month top. South Korean shares gained 2.2%, Chinese blue chips added 0.7%, while Hong Kong shares climbed 1.4%. Japan's Nikkei was closed for a holiday.

4) Rupee Boost
The Indian rupee inched 0.48% higher to 82.33 against the US dollar on Monday as the dollar index, which measures the greenback against six major currencies, fell below the 104 mark as investors moved to riskier assets.

5) Budget Hopes
With the Union Budget being just three weeks away, investors have pinned high hopes on Finance Minister Nirmala Sitharaman as it comes before the general elections scheduled next year. Analysts expect the Budget to be investor-friendly. There are also hopes of tax breaks.

6) Earnings Focus
With announcing its quarterly numbers after market trading hours, the earnings season would officially begin from today. TCS shares were trading higher by around 3% with Nifty IT being the top sectoral gainer in today's session. The IT index was up 2.53%.

7) Oil
Crude oil prices plunged sharply last week as investors are worried over fuel demand amid a global economic slowdown and rising Covid-19 cases in China. Brent crude futures rose 1.2% today but were below the $80 a barrel mark.

8) Technical Factors
Technical analysts say a part of today's rally was led by short covering of positions as Nifty had witnessed aggressive short build-up in the last few days with the near month OI increasing by almost 15 lakh shares last week.

Prashanth Tapse of Mehta Equities said the index would gain strength only after it closes above its biggest hurdle at the 18,463 mark.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)