The market held on to the positive momentum for third consecutive session on Wednesday after losing over a percent last week.
The stability in crude oil prices, which resulted in the rupee recovery, increase in FIIs buying and hope of trade talks meeting between US & China boosted market sentiment. Likely status quo by RBI in its December policy after stable retail inflation and PSU banks recapitalisation also aided the rally.
The 30-share BSE Sensex rallied 203.81 points to close at 35,716.95 and the 50-share NSE Nifty climbed 43.30 points to 10,728.90, but the market breadth remained negative.
Market breadth stood at about 3 shares declining for every share rising on the BSE.
"We maintain a positive outlook on the market on the back of improvement in the Indian macro environment, with oil prices cooling down, pressure of a widening fiscal deficit reduces," Hemang Jani, Head - Advisory, Sharekhan by BNP Paribas told Moneycontrol.
The rupee, too, has stabilised at the 70-mark which is positive for the equity markets, he added.
Here are five key factors that lifted market sentiment on Wednesday:
Global brokerage firms reaffirm faith on India
After Morgan Stanley, HSBC also raised India rating to neutral from underweight as investor holdings are very low.
"Valuations are more reasonable and we see continued strong earnings growth in 2019," the research house said, adding the lower oil prices for now are supportive of Indian equities.
HSBC said upcoming elections will start to become more important.
Elections in five states are going on, which will be end in the first week of December, followed by polling results on December 11.
Crude stability
Oil prices stabilised around $61 a barrel after sharp fall in last seven consecutive weeks.
Crude oil forms major part of India's import bill as the country imports around 85 percent of oil requirement, so any fall and rise in prices always have direct impact on fiscal deficit.
Brent crude futures, the international benchmark for oil prices, fell more than 30 percent in more than a month, after rising over 40 percent to above $86 (on October 3, 2018), the highest level seen since November 2014.
Global cues
Asian stocks were mostly higher after a cautious start as investors wait for an important meeting between the world's two largest economies later this week.
Japan's Nikkei, Hong Kong's Hang Seng and China's Shanghai Composite gained over a percent each, following positive close on Wall Street overnight.
National Economic Council Director Larry Kudlow said the White House was having "a lot of communication with the Chinese government at all levels" ahead of the critical meeting between US President Donald Trump and Chinese leader Xi Jinping at the G-20 summit in Argentina, reported CNBC.
Analysts raised concerns over global economic growth, especially after both countries applied additional tariffs on billions of dollars' worth of each other's imports.
F&O expiry
The futures & options contracts for November will expire on Thursday and traders will roll over their positions to next month, which will be closely watched by the Street.
The derivatives data at current levels reflects that there is a lot of outstanding short positions in the Nifty and we can expect another round of short covering probably towards expiry.
As per current derivatives data, Nifty can move towards 10,800-10,850 mark this week as the market undertone remains bullish with the support of consistent short-covering, Shitij Gandhi of SMC Global Securities said, adding the bullish scenario is likely to continue with Nifty having multiple strong supports at lower levels around 10,600 and 10,625 spot.
Maximum Call open interest (OI) of 37.66 lakh contracts was seen at the 10,800 strike price (which will act as a crucial resistance level for the November series), followed by the 10,700 strike, which now holds 30.44 lakh contracts in open interest, and 11,000, which has accumulated 27.67 lakh contracts in open interest.
Maximum Put open interest of 41.90 lakh contracts was seen at the 10,600 strike (which will act as a crucial support level for the November series), followed by the 10,500 and 10,700 strikes.
Meaningful Call writing was seen at 10,800 followed by 10,700 and 10,900 strikes while Put writing was seen at the strike of 10,700 followed by 10,600 and 10,800 strikes.
Technical outlook
The Nifty50 went near its 200-Day Moving Average, which is placed around 10,774 levels, after crossing 10,650 levels in previous session.
Experts expect the bullish momentum to continue in coming sessions and the index to march towards 11,000 levels if it decisively crosses 10,850 levels.
"Once the Nifty takes out the swing high of 10,774 then the index can march towards 11,000-11,140 in the short term," Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas said.
Thus he advised traders to position themselves on the long side of the trade & they can increase their exposure on the buy side once the Nifty crosses 10,774.
