Share Market Rally: After 5 consecutive days of decline, the stock market witnessed a tremendous rise today on 23rd December. The Sensex had jumped by almost 850 points in early trade. However, later this gain reduced slightly and at the end of trading it closed with an increase of about 500 points. Whereas Nifty increased to beyond 23,750. Heavy buying was seen in blue chip shares during trading today. This rise has brought relief to investors because before this the Sensex had fallen sharply by more than 5% in the last 5 days. However, today the market sentiment appeared to have changed. Let us know what were the reasons behind this rise in the stock market.
1. Softening in US inflation rate
The market has heaved a sigh of relief due to some softening of inflation rate in America. The US Commerce Department reported that the Consumer Price Index based inflation rate increased by 0.1 percent on a monthly basis in November. Whereas Personal Consumption Expenditure (PCS) stood at 2.4 percent, while the market was expecting it to be 2.5 percent. These figures have slightly improved the prospects for the pace of further interest rate cuts.
2. Good signals from global markets
Almost all major Asian markets started trading today with a rise. The indices of Seoul, Tokyo, Shanghai and Hong Kong saw a strong rise. This improved the sentiment of investors. Meanwhile, US indices – S&P 500, Dow Jones and Nasdaq gained more than 1 percent on Friday.
3. Shares of metal companies rise on expectations of safeguard duty
The Directorate General of Trade Remedies (DGTR) said that it is examining the demand to impose 25 percent safeguard duty on steel imports. After this news, today there was a good rise in the shares of metal companies, especially steel companies. Nifty Metal Index jumped up to 1 per cent in early trade today.
4. Technical setup of Nifty
Market analysts say that technical factors also played an important role in the recovery of Nifty today. Anand James, Sharp Market Strategist, Geojit Financial Services, said Nifty is set to move above its 200-day simple moving average (SMA), which currently stands at 23,837. He said, “If this uptrend gains momentum, the index can again touch the level of 24,165. However, if it fails to sustain above 23,700, it could be a sign of weakness. However, from the downside at 23.265. There is strong support, which is its low of November 21.”
5. US government ‘shutdown’ averted
An important bill related to providing funds to the government was passed in the US Parliament on Saturday. This averted the threat of a partial shutdown of the US government, which boosted investor enthusiasm and improved market sentiment.
However, analysts have warned that a sustained rise in the market is possible only if we see signs of growth in the economy. Ajit Mishra, Senior Vice President (Research), Religare Broking, said that for market movement, the stance of FIIs and the performance of global markets will have to be closely monitored. Apart from this, the expiry of derivative contracts in December can also increase the volatility in the market.
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