- Indian equity market rose sharply led by IT stocks and easing crude prices on Thursday
- Sensex gained 1,047.73 points at 73,829.62, Nifty 50 rose 308.80 points to 22,931.50
- Nifty IT index surged 2.26%, up about 8.8% in three sessions after strong HCLTech results
The Indian equity market bounced back on Thursday, as an extended rally in IT stocks and easing crude oil prices have cheered investors. What also supported the bulls' fightback was the breach of key technical levels, with the benchmarks crossing the crucial resistance zones.
At 10:46 am, the Sensex was up 1,047.73 points, or 1.44%, at 73,829.62, and the Nifty 50 was up 308.80 points, or 1.37%, at 22,931.50. Here are three reasons behind the sharp upmove.
1. IT Rally Extends
IT is doing the heavy lifting. The Nifty IT index was up 2.26% at 30,851.45, its third straight day of gains. By our calculation from Monday's close of 28,349.60, that is a rise of about 8.8% in three sessions.
The run began on Tuesday, when the index jumped 5.2% after HCLTech's September-quarter results, with HCLTech up 8.4% and TCS up 6.8%. It rose another 1.14% on Wednesday.
The stocks had ground to make up. The index fell 11.18% in September and was down 17.68% over the year to Sept. 30.
A firmer dollar is another support. The dollar index touched 102.6, near an 18-month high, and was near 102.75 on Wednesday. A stronger dollar helps because Indian IT companies earn much of their revenue in dollars.
2. Easing Crude
Brent crude fell 1.6% to $104.4 a barrel on Thursday morning, from near $106.65 on Wednesday. That is still above $100, but cheaper oil matters for India, which imports most of what it consumes.
Cheaper oil matters for India, which imports around 85% of its crude needs. A retreat in crude eases the jitters around inflation, which in turn improves the earnings outlook of listed companies who bet on sustained demand.
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3. Resistance Levels Breached
Technical analysts had marked out crucial hurdle before the market opened, and the index has now moved past it.
“A move above last week high of 22,776 will open further pullback towards 23,000-23,100 levels,” Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking, said. “Failure to move above 22,776 will signal consolidation in the range of 22,300-22,775.”
The Nifty had failed to get there on Tuesday, when a 1.6% jump took it to 22,721.95, just short of 22,776. It then slipped 0.44% to 22,622.70 on Wednesday. Thursday's gain has taken it past the mark in a single morning.
At 22,931.50, the Nifty is well above that level. A pullback rally is a recovery within a broader downtrend, which is why the analysts stop short of calling it a reversal. The index is also above the 22,770-22,800 zone that SBI Securities' Sudeep Shah flagged, a sustained move above which, he said, could extend the pullback rally towards 22,950. The index is less than 20 points from that target, and Mukherjee's next range of 23,000-23,100 is the level to watch.
Both analysts were careful. “Until a decisive breakout emerges, the index is likely to remain range-bound, with the broader structure still cautious,” Shah said.
The rally is also narrow. The Nifty Midcap index was down 0.11% and the Smallcap index down 0.41%. The Nifty is still about 5% below its August 28 peak, and foreign investors have sold about Rs 3.1 lakh crore of Indian equities this year, NSDL data show. They were net sellers of Rs 1,857.44 crore on Wednesday, exchange data showed.
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