Santa rally on D-Street; Nifty tops 18K, Sensex gains 721 points

The Nifty reclaimed the 18,000 mark and ended the session at 18,014, a gain of 208 points or 1.1 per cent

A combination of gains in financial stocks and optimism about easing US inflation, helped the indices post gains on Monday – it came after four sessions of continuous losses.

As a result, the Sensex reclaimed its 60,000 mark and ended the session at 60,566, a gain of 721 points or 1.2 per cent. The Nifty50 regained the 18,000 mark and ended the session at 18,014, a gain of 208 points or 1.1 per cent. 

The gains on Monday have infused hope in some sections of the market that the Santa Claus rally will happen this year too. Santa Claus rally is the phenomenon of stocks rising during the last five and first two sessions of a year.

Monday’s rally notwithstanding, this year, the investors are doubtful about the rally amidst heightened volatility. The cash turnover in the equity markets was less than the December average. The combined cash turnover (of NSE and BSE) was Rs 50,061 crore, a decline of 15.4 per cent from the monthly average of Rs 59,159 crore.

The personal consumption expenditures price index in the US rose 0.1 per cent and was at 5.5 per cent from a year ago. The November figures were the lowest since October 2021.

However, the optimism about US inflation data was somewhat offset by the concerns about China's Covid-19 situation. On Sunday, China’s National Health Commission announced that it would stop publishing daily Covid-19 case numbers. The latest announcement from China has made investors more cautious as the lack of information makes assessing its economic impact more difficult.

“The selling last week was perhaps overdone. Our Covid-19 situation is not as precarious as that of China. I expect some recovery," said G.Chokkalingam, founder, of Equinomics.

Meanwhile, some experts have also warned that US economic data has shown that inflation in the world's largest economy has not come down.

Also, equity markets are facing heightened volatility in 2022 amidst geopolitical tensions, rate hikes and the unwinding of the post-pandemic stimulus.

However, despite the volatility and record foreign portfolio investor (FPI) outflows, the Indian equity benchmarks have posted gains this year amidst strong domestic portfolio flows.

"Participants shouldn’t read much into a single-day rebound and wait for the sustainability of the move. We have the next hurdle around the 18,150-18,200 zone in the Nifty, so we recommend utilising further recovery to reduce positions. In absence of any major event, the upcoming expiry of December month derivatives contracts will keep the traders busy," said Ajit Mishra, vice president, technical research, Religare Broking.

On Monday. FPIs were net sellers of Indian equities worth Rs 497 crore, according to provisional data from exchanges. More than four-fifths of the Sensex constituents ended the session with gains. HDFC Bank rose 1.9 per cent, and ICICI Bank rose 1.5 per cent. The market breadth was strong, with 2,858 stocks advancing and 785 declining on BSE.