Indian markets resumed their upward trajectory on Friday, rebounding from the heightened volatility triggered by the Union Budget 2024’s capital gains tax hike and an STT increase on derivatives. Despite less favorable global cues and foreign portfolio investors pulling out of Indian equities following the budget announcement, the indices staged a notable recovery.
In today’s session, the Nifty 50 jumped 2.70%, reaching a new peak of 24,861 points, while the S&P BSE Sensex gained 1.62%, ending at 81,322 points, just shy of its peak.
Overall, the Nifty 50 concluded the week with a 1.24% increase, marking its eighth consecutive week of gains. This streak is the longest weekly winning streak since 2010, when the index achieved a similar run between February and April.
Similarly, the S&P BSE Sensex rose by 0.90% for the week, also extending its winning streak to eight weeks, highest since 2010.
According to analysts, the sharp market recovery post-Budget was largely driven by significant participation from domestic institutions. As clarity on individual sectors emerged, these institutions began deploying cash, fueling the rebound.
Mid- and small-cap indices saw recoveries as well. The Nifty Midcap 100 ended the week up by 3.33%, while the Nifty Smallcap 100 gained 2.48%. On the other hand, the BSE PSU index, which corrected sharply on the budget day, rebounded in the following sessions, finishing this week with a gain of 2%.
Tech titans powered the rally
Today’s market rally was driven by IT stocks on the stronger-than-expected growth of the US economy in the second quarter. The GDP increased at an annualised rate of 2.8% in the April-June period, up from 1.4% in the previous quarter.
Personal spending, the economy’s main growth engine, rose by 2.3%, exceeding projections. The strong GDP has also raised expectations that the Fed might initiate a first rate cut in September.
The US is a key market for Indian IT companies, which derive a significant share of their revenue from the country. Additionally, the recent June quarter results announced by most tech giants met expectations, further supporting the continued rally in IT stocks.
The Nifty IT index ended this week with a gain of 2.64%, extending its rally for the sixth consecutive week. Among individual stocks, Mphasis, Infosys, and TCS all recorded fresh 52-week highs in today’s session.
Budget boost
On the other hand, FMCG stocks have also rallied sharply this week after the government prioritised enhancing rural consumption through increased allocations for various rural schemes in the budget.
The government’s focus on rural development is also expected to positively impact the 2-wheeler market, benefiting domestic manufacturers such as Bajaj Auto, TVS Motor, and Hero MotoCorp.
Amid these developments, both the Nifty Auto and Nifty FMCG indices finished the week with gains of 5.16% and 2.70%, respectively. Notably, six constituents of the Nifty Auto index, including Ashok Leyland, Tata Motors, Apollo Tyres, TVS Motor Company, and Eicher Motors, recorded fresh all-time highs in today’s session.
Rally likely to continue
Rupak De, Senior Technical Analyst, LKP Securities, said, “The Nifty has experienced a downward consolidation breakout on the daily chart, suggesting a rise in optimism. A sustained trade above the very short-term moving average, the 21 EMA, gave the index bulls the strength to take the Nifty to new highs amid global market weakness.”
“A fairly large green candle, after several insignificant candles, clearly signals a bullish trend ahead. The trend might remain positive as long as it stays above 24,500. On the higher end, the index might move towards The trend might remain positive as long as it stays above 24,500,” he added.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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