Sensex Gains Sharply After Two Day's Rout: 4 Possible Reasons Bringing The Upmove

After a sharp sell-off in the past two trading session, the first session of the April series has brought some respite from across the board selling. This is probably due to improved global cues and as vaccine progress outweighed rising Covid 19 concerns.

Sensex Gains Sharply After Two Day's Rout: 4 Possible Reasons Behind The Upmove

"The second wave is unlikely to have a major impact on growth and corporate earnings. This exceedingly volatile phase of the market is turning out to be difficult terrain for traders. But, for long-term investors dips will provide opportunities to buy quality stocks. IT, financials, cement, chemicals are good bets", V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services is quoted as saying in a leading dailies report.

Here we discuss why the markets could have gained momentum today:

1. Global cues remain favourable:

Some support to the Indian markets has been lent by Asian peers that followed Wall Street's rally overnight. A Reuters report said that Asian stocks recovered from a 3-month low as investors put their focus on optimism around global economic recovery and did not give weightage to rising tensions between the West and China. Meanwhile at the time of writing this copy, European stocks also traded with strength with German DAX trading higher by close to 1 percent.

Also, in the US there has reported better than expected GDP which grew at a 4.3 percent annualized rate. Besides the unemployment claim number also lessened signaling improved business situation.

2. Heavyweight boost the indices:

The BSE Sensex rose to the day's high of 49234.66 lifted by strength in heavyweight stocks including HDFC twins, ICICI Bank and RIL. Individually, HDFC and HDFC Bank rose 3% and 2%, respectively. While ICICI Bank and RIL added 2% and 1%, respectively.

3. Metal and auto sector lead the gains on the headline indices:

In today's trade, all of the Nifty sectoral indices are trading in the green, with maximum strength of over 3.5% and 2% in metal and auto pack. The continuing rise in metal prices is providing a boost to companies in the pack with major gainers being Tata Steel, Hindustan Zinc, Hindalco, JSW Steel and SAIL.

Within the auto pack, the stocks pulling the indices higher have been Tata Motors, Bajaj Auto, Ashok Leyland, M&M and Motherson Sumi.

4. Cheaper valuations stimulate buying across some sectors:

After a sharp correction as the valuations have tumbled by quiet a margin, investors have been lapping up stocks that will win most from the economic recovery such as those from the banking and financial space, metals and auto.

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