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Sensex jumps 646 points: Key factors that drove the rally

However, analysts are advising investors to wait and see if the market can sustain the rally.|
Updated: Oct 09, 2019, 03.49 PM IST
A market expert said the surge is due to the bounceback that is happening at lower levels but if the market will sustain it still needs to be seen.
NEW DELHI: Benchmark equity indices shrugged off negative global cues and surged in Wednesday's session, thanks to low-level buying and a rally in banking and financial stocks.

The 30-share Sensex climbed 646 points to end at 38,178 while the NSE barometer Nifty jumped to 11,313, up 187 points.

Bank and financial stocks led the rally with IndusInd Bank gaining 6 per cent ahead of its Q2 result scheduled on Thursday. Brokerages expect a massive jump in the lender's bottom line.

Bank of Baroda and ICICI Bank were other top gainers from the banking sector, rising more than 3 per cent each. Nifty Bank was up 2.3 per cent in the afternoon session.

However, analysts are advising investors to be watchful and see if the market can sustain the rally as uncertainties loom over the US-China trade front. Both nations will meet on Thursday to draw out a possible trade deal.

Here are key factors that are driving market:

Banks, financials rally: Private lenders and financial stocks shrugged a lull of last six trading sessions and witnessed heavy buying. HDFC duo, Kotak Mahindra Bank and ICICI Bank together contributed 400 points to Sensex's 600 point rise. SBI, IndusInd Bank and Axis Bank also traded together.

"As NBFCs and public sector banks are going to be fairly less active, to me the one safe play is the private sector banks because they have a healthy mix of retail and corporate books, said Sunil Subramaniam, Sundaram MF. On a year-on year basis, their earnings should still show decent growth, he added.

Progress on US-China trade front: China is still open to agreeing a partial trade deal with the US, an official with direct knowledge of the talks said, according to a Bloomberg report.

Negotiators heading to Washington for talks starting Thursday aren’t optimistic about securing a broad agreement that would end the trade war between the two nations for good, said the official.

But China would accept a limited deal as long as no more tariffs are imposed by President Donald Trump, including two rounds of higher duties set to take effect this month and in December, the official said. In return, Beijing would offer non-core concessions like purchases of agricultural products without giving in on major sticking points, the official said, without offering further details, Bloomberg reported.

S&P 500 futures rose 0.9 per cent following this development and European shares too turned positive.

Low-level buying: After six straight sessions of losses, traders and investors flocked to buy stocks, leading to a rise in equity markets back home even as the global mood remained somber.

A market expert said the surge is due to the bounceback that is happening at lower levels but if the market will sustain it still needs to be seen.

Technical factor: Market appears to have bounced back after testing its critical support placed around 11,100 as it was continuously falling for the last six trading sessions from the highs of 11,695, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, said.

However, he said, it will be too early to conclude that Nifty resumed its upmove. “In the best case this rally may get extended up to 11,400 level. As long as this index sustains below 11,400, the trajectory of the market shall remain negative and hence rallies can be considered as an opportunity to create fresh shorts. Contrary to this a positive trend shall be expected only on a close above 11,400.”

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