Top four factors that fuelled the 456-point rally in Sensex on Friday

NEW DELHI: The S&P BSE Sensex rallied 400 points to close the day at 26,316.34, led by gains in Infosys, TCS, ITC, Sun Pharma and HDFC Bank. The Nifty50 reclaimed its crucial level of 8,110 supported by gains in IT, realty, power, oil & gas, metal and banking stocks.

Going by the buzz on Dalal Street, here is a list of four top factors that could have fuelled the rally in stocks.

Rupee regains foothold: After hitting a record low in the previous session, the domestic currency jumped 0.5 per cent against the US dollar on Friday supported by suspected intervention of the Reserve Bank of India (RBI). The rupee was trading at 68.41 to the dollar, up 0.5 per cent from its previous close of 68.57 in the first 90 minutes of trade, which is its maximum gain since September 22. The rupee opened at 68.73 and touched a high of 68.36 in the first half of the day.

Most experts tracking the currency said the pain may not be over yet, while some said the domestic currency may slip to the 70 level in the near term.

“Though there are rampant speculations that RBI will like to protect the rupee around the 68.85 level, if the dollar index – which is already at a 13-year high – maintains its strength and competitive Asian currencies continue to depreciate, then it may not make any economic and strategic sense to artificially inflate our currency, which is already overvalued on a relative basis,” Abhishek Goenka, Founder & CEO, India Forex Advisors, told ETmarkets.com.

“We expect the US dollar to make fresh highs sooner or later with mild intermediate corrections. Importers need to be careful and hedge through options, if needed. Exporters can go slow on covers since the premiums have already fallen a lot in short term,” he said.

Technical bounceback: The Nifty50 closed below its crucial support level of 8,000 on Thursday, negating the bullish reversal Hammer pattern formed on two occasions earlier in the week. For the bulls to come back, it is important for the Nifty50 to reclaim the 8,000-8,050 levels. However, this could be a technical bounceback as the index was trading near the oversold levels. Traders should tread cautiously.

A close above the 8000-8050 zone would boost bullish sentiment, experts said. On the downside, the Nifty50 has meaningful support near the 7,920 and 7,880 levels, but it needs to cross and hold above the 8,050 level to get a confirmation of trend reversal after a sharp drop over the past five weeks.

“It has to cross and hold above the 8,000-8,050 zone to witness an upward move towards the 8,150, 8,220 levels, while holding below the 7,920, 7,880 levels might again start the next downward leg towards the 7,600 level in the coming sessions,” Chandan Taparia, Derivatives & Technical Analyst - Equity Research at Anand Rathi Financial Services, told ETMarkets.com.

IT, pharma stocks lead gains: The slump in the rupee to an all-time low against the US dollar and chances of further drop in the domestic currency to the 70 level boosted sentiment on the export-oriented IT and pharma counters, which would be key beneficiaries of the plunge in the rupee.

Shares of Infosys, TCS have risen over 4 per cent each while those of Lupin, Sun Pharma and Wipro were up 3 per cent each in Friday’s trade.

“The way the rupee has corrected, IT looks like a safe bet and that is pretty much getting reflected. I am positive on the largecap IT stocks such as TCS and Infosys and that is definitely a good place to hide at this stage,” Sudip Bandyopadhyay, Inditrade Capital, said in an interview with ETNow.

“Some of the pharma stocks such as Lupin, which has a great US business and has an excellent pipeline in the US, look good. They also have a good status vis-à-vis USFDA, particularly after their Goa plant got a clean chit. So, that is a good buy at current level,” he said.

Fitch on India GDP growth:
Fitch still expects India’s GDP growth to trend higher than China’s in the medium term. “We expect India’s GDP growth to accelerate in FY2018 on the back of reforms, monetary easing of the past year and large infrastructure spends,” the rating agency said in a report.

“While in China, continued increase in leverage in the broader economy is becoming more and more of a burden on growth. For China, we forecast real GDP growth at 6.4 per cent in 2017, down from a projected 6.7 per cent in 2016, due to the recent macro-prudential tightening measures targeting the housing market,” it said.