Mumbai: The equity markets zoomed higher on Tuesday amidst fresh buying in frontline stocks that propelled Nifty and Sensex to a fresh 52-week high. The Nifty surged 136.90 points or 1.59 per cent to close at 8,744.35, a sixteen month high. The Sensex vaulted 440.35 points or 1.58 per cent to end the day at 28,343.01.
This was the markets biggest single day gain since July 11, 2016. While the markets broke free from a tight range that they were confined to during the past several weeks, analysts are advising a bit of caution as most of the positives have already been factored in and the markets would require fresh triggers to stage a major upside from the current levels.
“It was more of a liquidity driven rally coupled with short covering,” said Ambareesh Baliga, senior research analyst. “The Indian markets had under performed their Asian peers during the past several weeks following which lot of traders had turned cautious and created short positions.
“Once the markets made a fresh high, there were lot of short coverings, which pushed the markets further high. One thing to be noted is that the recent rally was largely driven by ‘under dogs’ like PSU Banks, capital goods, Oil & Gas, engineering and construction sectors on expectation that a pick up in domestic growth will translate into higher earnings growth. If earnings fail to match expectations, the markets are likely to see a steep corrections from higher levels,” added Mr Baliga.
Interest rate sensitive banks and auto stocks led the rally. “Renewed buying interest from overseas investors helped the indices to break free from the excruciating range seen all through August. This seemed to have attracted further participation from those waiting for a clearer signal,” said Anand James, chief market strategist, Geojit BNP Paribas Financial Services.
