D-Street investor wealth surges by Rs 4 lakh crore. 5 factors behind today’s rally

The head-scratching rally on Wall Street overnight, which came after fresh data showed high US inflation, had a soothing effect on Dalal Street ahead of the Diwali festival. As the Sensex rallied over 1,000 points on Friday, investors were left richer by around Rs 4 lakh crore as the total market capitalisation of all BSE-listed stocks shot up to Rs 273.82 lakh crore.

Here are the key factors behind today's rally:

Global cues
Breaking a six-day losing streak, the US market staged a comeback on Thursday with the Dow soaring 2.8% and the Nasdaq adding 2.2%, even though fresh data showed high US inflation. The rally, which many attributed to technical factors and short covering by traders, left analysts hunting for explanations.

"The market reversal was a head-scratcher. Despite a hot inflation report, US equities turned positive as some investors are convinced core inflation will soon start trending lower," said OANDA's market analyst Edward Moya.

Tokyo's benchmark Nikkei index and Hong Kong's Hang Seng both surged more than 3% each after robust gains on Wall Street. Analysts said gains could quickly unwind as investors grapple with the reality that surging US inflation will likely lead to higher interest rates for longer, hastening a global recession.

Crude oil prices
Both Brent and WTI crude oil prices were down for the week by about 3% after two prior weeks of gains amid recession concerns. Brent crude oil was trading below the $95 a barrel mark.

Dollar index
The dollar index was little changed after falling 0.5% in the previous session as investors digested data that showed U.S. consumer prices increased more than expected in September. The Indian rupee rose 3 paise to 82.21 against the US dollar.

Technical factors
On Thursday's weekly expiry, Nifty respected the Put base at 17,000 and ended just above it amid broader market weakness. "For the coming weekly settlement also, ATM strikes hold the highest options base suggesting a broader range bound move," ICICI Securities said.

Chart readers said Nifty has formed a triple bottom over the past three days in the 16,950-16,960 band. Post the return of positive sentiments across the globe, Nifty could now face resistance at 17262 and then at 17429.

Earnings factor
After beating Street estimates in its Q2 numbers, Infosys was among the top gainers in Nifty. The stock rallied around 4%. Up over 2%, Nifty IT was among the top sectoral gainers today. Besides Infosys, several other IT majors - HCL Tech, Wipro and MindTree - have announced their quarterly numbers this week.