The market sentiment improved across the Asian markets today and Indian indices after correcting substantially in the last two days recovered most losses. But analyst seem cautious and advice the same to investors as valuation bubble is possible and there remains a threat to steep correction in the short term.
So, now what propelled today's over 900 points rally on the Sensex:
1. US policymakers pushed for a higher stimulus:
The US President-elect nominee to handle the treasury, Janet Yellen on Tuesday will vouch for a larger stimulus before the Senate Finance Committee. Biden outlined a $1.9 trillion stimulus package for taking the US economy out of the Covid 19 led crisis.
2. Joe-Biden's inauguration ceremony:
There is also scheduled Joe Biden's inauguration ceremony and there is seen optimism among investors for his smooth transition to the White House.
3. Financials and RIL lifted sentiment:
Even as there is expected a surge in NPAs as the coronavirus relief is being withdrawn, NBFCs in today's trade gained led by gains in Bajaj Twins. Also, RIL gained for the second consecutive day and there is optimism around the scrip with up to 18% upside seen in the counter.
4. Auto pack also sees a push:
As auto makers from Tata Motors, M&M and MAruti all increased their vehicle prices and then there was seen an upward tick in their share prices.
5. Realty pack led the list of sectoral gainers:
After Indiabulls Real Estate positive comments which said that there is seen increasing demand for completed projects and there shall be increased collection all through in this year.
6. China's economic growth of 2.3%:
China on the previous day reported growth rate of 2.3 percent for the last quarter while other economies including Europe are still Covid 19 led downturn.
7. Sustained foreign fund flows also continue to boost Indian markets:
As per the views of leading brokerage house ICICI Direct "Global liquidity is unlikely to do a reversal anytime soon. Till the time the recovery is on a firmer path in key markets like the US, the withdrawal of liquidity is not going to happen. The inflows are going to remain there but the quantum of inflows may fluctuate". As per NSDL data, foreign portfolio investors (FPIs) have pumped in over Rs 13,000 crore in the Indian equities in January so far.
Flows are seen amid slump in the dollar index making emerging markets more attractive and strong earnings so far for the Q3 period of FY21.
8. Hopes around budget 2021:
FM Sitharaman has iterated that amid the pandemic, this year's budget shall be a one of its kind budget in 100 years and there shall be massive public sector investment and expenditure push, including on infrastructure projects and the health sector. This is also aiding market sentiment.
But despite the positive bias what can weigh is any fresh levy of taxes or surcharges in the budget, interest rate hike across the globe, rise in US dollar, coronavirus situation not coming under control and other geo-political issues.