Nifty 50 hit a record high on November 9 as the index closed at 12,461.05, up by 1.61%. The next day, Nifty jumped again with spring and concluded at 12,631. There has been a remarkable rally in the past few days which has taken Nifty 50 to even cross its pre-covid highs. Today, as of 11 November, it has even touched 12,750.
But do we have the vaccine already? Not really. Is the global economy in a boom? Not at all. Then how are we witnessing higher highs in the Indian stock market? Here are the five reasons which are stimulating this boost in the stock market.
US Elections
As discussed in The Stock Market Show several times, the market was supposed to react positively if there was a clear winner in the US election. This is what happened. Democrat Joe Biden defeated Donald Trump to become the 46th President of the United States. To understand more about this, click here. His triumph was welcomed by the market participants. They believe that his democratic policies will help the Indian market to expand. This has instilled confidence in the investors even when India is finding it very tough to contain the spread of coronavirus. For how many days more this positive news can support Nifty is yet to be seen.
There is a constant worry lingering in the back as Trump refuses to accept defeat. Secretary of State Mike Pompeo, who is chief foreign affairs adviser to The President of The United States has even gone on to say that the Trump Administration is ready to move into a successful second term. Keep watching marketfeed for updates.
Bank Nifty Rally
Nifty Bank has been one of the key driving forces behind the Nifty rally. There are several reasons why Bank Nifty has moved on this consistent uptrend. The market was expecting not-so-great Q2 results for banks. Increased expenditure and high NPAs due to moratorium led to low expectations. But then, HDFC Bank and Kotak Bank came out with astounding numbers. Provisions for defaults were decreased which led to an increase in profits. A similar pattern was followed by every major private bank as they reported amazing numbers. The honourable Supreme Court also ruled in favour of banks in the interest-on-interest case. The government of India took the responsibility to pay the amount to the banks for some cases. The green candles in the chart below give you a look at how the index has rallied up.
COVID-19 Vaccine
The news which we were waiting for days finally hit the market last evening. US pharmaceutical giant Pfizer and German biotech firm BioNTech announced that they have registered an amazing response from their coronavirus vaccine. In the ongoing Phase 3 trials, the vaccine given to the infected patients has been 90% effective. The company is also optimistic to supply 50 million vaccine doses globally by the end of this year. This is a huge development which has taken all the global markets to go upwards. The US election is done and dusted and we believe that this positive news can take the market to even higher points in the coming days.
The Indian Festive Season
The people of the nation are struggling with the virus but that is not stopping them from celebrating the big Indian festivals. Should they refrain a bit? That’s a completely different debate. There are several festivals which are celebrated from October to December. Navratri, Dussehra, Diwali, just to name a few. Even in these uncertain times, people are venturing out to buy new goods, and boosting the economy.
Whether it’s the auto market or the consumer goods market, all are seeing a surge in sales after an almost-dead first quarter. The market has responded well to this change. Also, there’s a possibility that a new stimulus can be launched by the Indian government in the coming weeks. Any effective help from the government will surely make the market participants happier.
IT and Pharma
Two sectors which got all the investment in the pandemic were the IT and Pharma sector. In October, both the sectors rallied Nifty to touch the levels of 12,000 three times. Strong Q2 results from the IT sector were offering a lot of boosts. TCS and Wipro announced share buybacks which signaled the success of tech companies to operate during the pandemic.
One sector which can easily transform to the work-from-home culture was the IT sector. With the help of in-built or third-party cloud-based technology, employees easily accessed the data sets. This helped them to reduce their rent cost and other fixed costs. With vaccines only the hope which can bring an end to Covid-19, people invested heavily in the pharma sector. All the pharma stocks have given staggering returns during the 6 months. This excessive demand has also made a few of the stocks in this sector overvalued. Once the vaccine is out, will these stocks correct themselves and go down? Yesterday, Nifty IT and Nifty Pharma went 3.86% and 4.33% down respectively. Is it a signal of what to come? Is a major correction in these two sectors just ahead?
