After choppy trading in the last three sessions, equity markets rallied on Tuesday as the drop in retail inflation to an 18-month low of 2.19% in December fuelled hopes of a rate cut by the Reserve Bank of India (RBI).
The Monetary Policy Committee of the central bank is scheduled to meet from February 5 to 7, 2019.
The BSE Sensex on Tuesday surged as high as 495.75 points, before settling at 464.77 points, or 1.3% higher at 36318.33. NSE Nifty rose 159.35 points to 10896.95 before ending 149.2 points, or 1.39% higher at 10886.80.
A day after the government data was released, the market sentiments were upbeat as domestic institutional investors engaged in heavy buying.
Only three stocks of the 30-share BSE Sensex ended in red, with Maruti Suzuki, ICICI Bank and Power Grid Corporation being the top three, each falling less than 1%. The top gainers were YES Bank, Infosys, Vedanta, Reliance Industries, Tata Consultancy Services and Bajaj Finance, rising between 2% and 4%.
Analysts say quarterly results will play a major role in determining further upside in the markets.
According to an analyst, some of the "heavyweights" are yet to announce their third quarter results and that, along with global market trends, would determine how domestic markets perform going ahead as uncertainty and volatility are expected to continue till the general election.
A report by Standard Chartered Securities said key benchmark indices ended on a strong note tracking higher global markets, adding that market sentiment was boosted by encouraging macroeconomic numbers released on Monday. "Retail inflation dropped to an 18-month low of 2.19% in December 2018, creating headroom for the RBI to cut interest rate in its monetary policy review next month," the report said.
Among secondary barometers, S&P BSE MidCap index and S&P BSE SmallCap index rose 0.6% and 0.7%, respectively, both underperforming the Sensex. The market breadth, indicating the overall health of the market, was positive.
Oil halted its retreat near $51 a barrel on forecasts for a drop in U.S. inventories and as a rebound in equities signalled investor interest in risk assets was improving, the report further said.
The benchmark Brent crude futures rose to around $59 per barrel.
Gaurav Ratnaparkhi, senior technical analyst, Sharekhan by BNP Paribas, said Nifty looks poised to stretch further North before resuming the larger downtrend. On the higher side, 11000-11050 shall be the key area to watch out for.
HDFC Securities in its report said the short-term trend of Nifty seems to have reversed up firmly, after a choppy trade of the last few sessions Nifty needs to sustain above this upside breakout for the next couple of sessions to confirm more upside for the near term.
Sameet Chavan, chief analyst – technical and derivatives, Angel Broking said a good trended move was visible throughout the day, with a fresh leg of rally expected to commence now.
"Unless there is some unfavourable development from the global markets, we expect the Nifty to head towards 10970 and then to test 11150. On the flip side, 10820 followed by 10777 are now likely to act as strong supports," Chavan said.
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Only three stocks of the 30-share BSE Sensex ended in red, with Maruti Suzuki, ICICI Bank and Power Grid Corporation being the top three, each falling less than 1%. The top gainers were YES Bank, Infosys, Vedanta, Reliance Industries, Tata Consultancy Services and Bajaj Finance, rising between 2% and 4%.
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