Sensex zooms 500 points; analysts see more upside

The current up move can last a bit longer, technical analysts say, and expect the Nifty to hit 8,750 in the near-term

Markets gained ground on Tuesday, with the S&P BSE Sensex and the Nifty50 indices crossing the 28,000 and 8,600 levels, respectively in intra-day deals. While the S&P BSE Sensex ended around 1.9% higher at 28,050 levels, the Nifty50 also moved up 1.9% to close at 8,677 levels The up move is in-line with most Asian peers – Hang Seng, Nikkei and Shanghai Composite – that rallied between 0.4% - 1.5%.

"A pull back in US dollar, whetted global risk appetite, sparking rallies in currencies, commodities, and global equity markets. Being in the earning season also helped investors to be stock specific, and ignore recent falls. The GST council meeting that is underway also helped investors to look ahead," said Anand James, chief market strategist, Geojit BNP Paribas Financial Services in a note.

At the global level, the rally comes a day ahead of China’s third quarter gross domestic product (GDP) growth data. Back home, analysts are also keeping a tab on the progress on the GST Council’s three-day meet that began on Tuesday to decide key rates. 

"Markets traded firm as investors searched for bargains while traders drove up stocks on short covering. Positive global cues also gave a fillip to domestic markets as stocks across the globe edged higher with commodities-related stocks leading the gains after prices of major industrial metals and crude oil rose on a softer dollar," suggests Shreyash Devalkar, Fund Manager – Equities, BNP Paribas Mutual Fund.

 

According to a recent Business Standard report, the Centre is likely to propose a four-tier tax structure under the GST, with a peak slab of 26%. Almost 20-25 per cent of all taxable goods, including those consumed by the middle class, could come under the peak rate, the report says.

“A lot of things are falling into place for the Indian markets. There is some stability in the geopolitical situation and this will lend stability to the markets. The macro-economic data is also supportive. The hike in rates by the US Federal Reserve (US Fed) is an outcome of strengthening of the US economy. While a rate hike may see a knee-jerk reaction in the markets, but eventually they will bounce back. A lot of expectations have already been built in to the stock prices,” says G Chokkalingam, founder & managing director of Equinomics Research & Advisory.

Despite the run-up on Tuesday, technical analysts suggest that the current up move can last a bit longer and expect the Nifty to hit 8,750 in the near-term.

“We had been expecting a bounce-back given that the markets had been drifting lower since the past few sessions. The Nifty has been range-bound between 8,500 and 8,750. The overall bias remains positive and I expect the current up move to extend at least till 8,750 – 8,780 levels. That apart, I do not expect the derivatives expiry for the October series below 8,500 levels. There is a good probability that the Nifty breaks above 8,900 levels in November,” said Sacchidanand Uttekar, equity technical analyst at Motilal Oswal Securities.

On the other hand, Chokkalingam expects the S&P BSE Sensex and the Nifty50 indices to cross 30,000 and 9,300 levels respectively, by December 31, 2016 in case domestic cues, especially the geopolitical situation, remain supportive.