The domestic market remained in positive territory for the fifth consecutive session on July 21 with gains led by financial heavyweights such as IndusInd Bank, Bajaj Finance and Bajaj Finserv even as investors awaited European Central Bank (ECB) meet outcome.
Global cues were mixed as investors anticipated the ECB will raise interest rates on Thursday to control inflation.
Eurozone consumer prices jumped 8.6% year-on-year in June after an 8.1% rise in May and a 7.4% increase in April, fanning worries regarding the rate hikes at a time when the economy is under stress due to the ongoing Ukraine war.
Analysts and economists expect the ECB to raise rates by 25 bps to 50 bps on Thursday and a similar or even bigger hike in September.
The return of foreign portfolio investors (FPIs) appears to have offered comfort to the domestic market. Data show FPIs have been buying into Indian stocks since July 18.
"With support from FII buying, the domestic market was able to withstand the downward pressure from global markets to close on a positive note," said Vinod Nair, Head of Research at Geojit Financial Services.
Nair is of the view that ECB may raise rates by 50bps, while the Fed is expected to increase rates by 75bps in the upcoming meeting scheduled next week.
"Even though a rate hike of this magnitude has already been factored in, the major market driver would be their commentary on future inflation and growth forecasts," said Nair.
Sensex ended with a gain of 284 points, or 0.51%, at 55,681.95 with 26 stocks in the green and 4 stocks - Dr Reddy's Labs (down 1.89%), Kotak Mahindra Bank (down 1.05%), Reliance Industries (down 0.56%) and HDFC Bank (down 0.34%) - in the red.
Shares of IndusInd Bank (up 7.88%), Bajaj Finance (up 3.27%), Bajaj Finserv (up 2.52%), Asian Paints (up 1.91%) and Tech Mahindra (up 1.59%) ended as the top gainers in the Sensex index.
BSE Midcap and Smallcap indices closed 1.24% and 0.90% higher, respectively. Nifty50 closed at 16,605.25, up 84 points, or 0.51%. Among the sectoral indices, BSE Telecom and Capital Goods rose more than 2% each.
As many as 101 stocks, including ITC, Bajaj Auto, Mahindra & Mahindra Financial Services, Varun Beverages and Adani Enterprises, hit their 52-week highs.
“Investors traded with cautious optimism as gains in oil & gas, power, realty and banking stocks helped markets extend gain for the fifth straight session. The return of FIIs into domestic equity markets in the last few sessions coupled with receding commodity prices and hopes that the US Fed may not go for aggressive rate hikes in its next meeting has somewhat tempered the fears of investors," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd.
Chouhan pointed out that on the daily charts, the Nifty formed a bullish candle and closed above the 100-day simple moving average (SMA), which is broadly positive.
"For traders, 16,500 would act as a key support level and above which the index could move up to 16700-16750. On the flip side, the strong possibility of a quick short-term correction is not ruled out, if the index trades below 16,500. Below the same, the index could slip till 16,450-16,420,” said Chouhan.
Mazhar Mohammad, Founder & Chief Market Strategist, Chartviewindia.in underscored that Nifty50 managed to sustain above its 200-day exponential moving average (EMA), which was otherwise capping the pullback swings, for the second session in a row.
He said one can retain an optimistic stance as long as this counter sustains above 16,483 and look for a target of 16,790.
However, the last two candles on the daily chart not only resemble indecisive formations but are also accompanied by overbought reading on certain momentum oscillators. Therefore, a close below 16,500 can trigger a short-term downswing, Mohammad added.
"We advise a neutral stance on the long side bet but the intraday shorting opportunity may arise below 16,480," said Mohammad.
Disclaimer: The views and recommendations made above are those of individual analysts not of MintGenie.