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What’s Driving The 700 Points Sensex Rally Today?

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Benchmark indices have staged a dramatic recovery with the Sensex jumping by almost 700 points in trade, touching almost 40,600 points.

Strong global cues

The rally is largely being driven by strong global cues, as the Coronavirus worries start gradually fading. The US Dow Futures were pointing to further gains and most of the Asian markets were trading higher.

Drop in oil prices

Crude oil prices plunged in trade, on belief that oil demand would be adversely hit due to the Coronavirus. In fact, Brent crude oil prices have now dived as much as 20 per cent from levels seen on Jan 6. A drop in crude prices augurs well for the Indian stock markets.

Buying in heavyweights

 

Solid buying in heavyweights is what is pushing the indices higher. HDFC Bank and Reliance have together a weightage of almost 20 per cent in the index. Both these stocks are up more than 2.5 per cent each, which is pushing the benchmarks higher.

Short covering rally

Also, there seems to be a short covering rally, as investors who sold immensely after the Budget, maybe covering their positions. The recovery today was more of a technical rebound.

Possibility of selling emerging at higher levels

Analysts say there could be a high possibility of selling emerging at higher levels and the rally today could be more of short covering. Net sale/buy numbers from Foreign Portfolio Investors would be eagerly awaited.

What’s Driving The 700 Points Sensex Rally Today?

Its highly possible that we may see increased volatility in the coming months. A lot of stocks have been beaten down and are still at 52-week lows. Today's rally is largely being driven by the heavyweight stocks, which too had seen some selling pressure in the last two quarters. With most of the corporate quarterly numbers for Dec 31, 2019 done, investors would want to focus their attention on global cues.

Volatility levels are likely to shoot-up in the coming days.

Read more about: sensex nifty share market
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