Sensex rallies 680 pts, Nifty at 22,575; 5 factors pushing stock market indices higher

Domestic equity markets kicked off the week on a strong note as the buoyancy continued at Dalal Street after Friday's hiatus. Headline indices were back in the gaining trajectory with headlines posting strong gains in the first half of the session.

By 12.15 pm on Monday, BSE Sesnex rose more than 680 points, or 0.90 per cent to 74,410.56. NSE's Nifty50 index rallied more than 150 points, or 0.70 per cent to 22,571.55. Broader markets were also seen in green with BSE midcap and smallcap indices gaining up to half a per cent each for the day.

The major negative in the market continues to be the sustained selling by FIIs, triggered by the high bond yields in the US. This selling by FIIs, in both equity and debt, will continue to weigh on markets so long as the US bond yields remain high, which, in turn, will be decided by the US inflation numbers, said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

"The latest US core PCE inflation numbers came in on expected lines with 2.8 per cent YoY growth. Consequently the bond yields have marginally drifted down and the US equity markets surged last Friday. FII selling will continue, but is likely to be lower than in recent days," he said.

Here are the key factors that pushed the headline indices higher on Monday:

Eased geopolitical concerns
The easing tensions between Israel and Iran supported the buying sentiments at Dalal Streets. Israel-Hamas peace talks in Cairo eased fears of a wider conflict in the Middle East. Stepped-up efforts to mediate a ceasefire between Israel and Hamas moderated geopolitical tensions

Upbeat Q4 earnings
The strong set of numbers from private lenders like ICICI Bank, Axis Bank and HDFC Bank pushed the headline indices higher. The three private lenders contributed about a 325 points rise in the Sensex's gains for the day. Even IT counters like Tech Mahindra also surprised the street.

Fall in crude oil prices
Oil prices fell in early Asian trading on Monday amid easing geopolitical tension in the middle east and the US inflation data further dimmed the prospects of interest rate cuts anytime soon. Both Brent crude futures and West Texas Intermediate (WTI) futures dropped about a per cent each.

Dollar Index takes a breather
The prospect that US rates would remain in restrictive territory for longer have propped up the greenback, though it was broadly on the back foot on Monday. The dollar index fell 0.34 per cent to 105.60. In the bullion market, Gold dipped 0.2 per cent to $2,333.30 an ounce, while the Indian rupee is expected to open little changed on Monday and likely to remain in a narrow range.

Technical view
April has been a roller coaster for Indian equities. The Nifty fell from its all-time high of 22,775 due to the Iran-Israel crisis, coupled with fears of a delay in rate cuts by the Fed due to rising US CPI inflation. Eventually, the Nifty fell below 21,800, representing roughly a 1,000-point correction, said Rupak De, Senior Technical Analyst, LKP Securities.

"As soon as it reached 21,800, buyers stepped in to protect the Nifty from falling below an earlier swing low, leading to a smart recovery of more than 800 points. The sentiment appears positive as long as it holds above 22,300. On the higher end, the Nifty might move towards 22,800-23,000 in May. A fall below 22,300 might trigger a correction towards 22,500," he said.