Sensex, Nifty Jump 1% to Hit All-time Highs: What's Driving the Rally

Equity benchmark indices extended their record run following positive cues from global markets amid the start of the US Federal Reserve's monetary easing policy. The BSE Sensex rallied over 1000 points to breach the historic 84,000 mark for the first time ever, and the Nifty also touched its new record high level.

The 30-share BSE Sensex jumped over 1,000 points to touch a 52-week high of 84,248.69 in morning trade. The NSE Nifty surged 300 points to a new all-time peak of 25,726.65. The combined market capitalization of all BSE-listed stocks increased by Rs 4 lakh crore to Rs 469.5 lakh crore.

FOMC projections suggest further rate cuts this year, alongside steady GDP Growth forecasts, analysts say.

The Indian economy will grow 6.7 per cent annually between now and 2030-31 or become the third largest economy in the world, S&P Global said on September 19.

Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd says Nifty is expected to trade within the 25,000-26,000 range, with key resistance at 25,500.

"With strong market momentum, Nifty looks primed for gains. Stock picks include Titan (CMP ₹3,781) with a target of ₹3,951, and Oberoi Realty and Naukri, both offering bullish potential on intraday weakness," said Tapse.

In Asian markets, Seoul, Tokyo and Hong Kong were trading in the green while Shanghai traded lower. The US markets settled with record gains on Thursday.

Here’s why markets are rallying today:

Global Markets: The Dow ended above 42,000 for the first time, while also logging a record close alongside the S&P 500.  At close, the Dow Jones Industrial Average, closed higher by 1.26 per cent at 42025, the Nasdaq Composite, gained 2.51 per cent, to end at 18,013.98, the S&P 500 climed 1.7 per cent to end at 5713.64 points. Asian shares extended their rally on Friday, benefitting in the afterglow of an outsized interest rate cut in the United States.

US Fed Rate Cut: US stocks surged a day after the Federal Reserve cut interest rates for the first time in four years on growing optimism that the Federal Reserve's jumbo interest rate cut will deliver a "soft landing" for the US economy. A drop in US jobless claims to the lowest since May signaled the labor market remains healthy despite a slowdown in hiring.

"The good labour market data from the US indicates that the labour market is only slowing, not deteriorating. With inflation under control, this means the US is set for a soft landing under a declining interest rate scenario. This is positive for global equity markets,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Recovery in broader markets: The broader market indices rebounded on Friday after witnessing selling pressure in the past few sessions. Both the BSE Midcap and Smallcap indices break a three-day losing streak and jumped over a per cent each. “Weakness in the broader market on valuation concerns is another important trend. These trends are likely to continue," he added.

Rally In Banking Stocks: The Nifty Bank index rose for the seventh straight session and hit a fresh high of 53,357 led by gains in ICICI Bank, HDFC Bank, and Kotak Mahindra Bank were up around 1-2 per cent. Banking stocks have maximum weightage in the benchmark indices. The index has jumped over 4 per cent so far in September, after falling by 1.5 per cent in July and 0.4 per cent in August.

Sameet Chavan, head of research, technical and derivatives at Angel One says the development in the banking sector is poised to play a critical role for market participants as it approaches its all-time high.

“A substantial surge is likely to instill confidence in the markets. Additionally, it will be crucial to maintain exclusivity as we anticipate sectoral rotation in the near future,” he added.