5 Reasons Why Sensex Surged 765 Points Today

Mon, 30 Aug Closing

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Indian share markets witnessed positive trading activity throughout the day today and ended on strong note.

Benchmark indices scaled new record peaks as Jerome Powell's speech last Friday suggested interest rate hike in the US could be later than previously thought.

At the closing bell, the BSE Sensex stood higher by 765 points (up 1.4%).

Meanwhile, the NSE Nifty closed higher by 226 points (up 1.4%).

Bharti Airtel and Divi's Laboratories were among the top gainers today.

Tech Mahindra and Eicher Motors, on the other hand, were among the top losers today.

The SGX Nifty was trading at 16,958, up by 243 points, at the time of writing.

The BSE Mid Cap index and the BSE Small Cap index ended up by 1.7% and 1.6%, respectively.

On the sectoral front, gains were largely seen in the metal sector, power sector, and telecom sector.

Shares of Bajaj Finance and Info Edge hit their respective 52-week highs today.

US stock futures are trading on a flat note today with the Dow Futures trading up by 17 points.

The rupee is trading at 73.26 against the US$.

Gold prices for the latest contract on MCX are trading down by 0.4% at Rs 47,344 per 10 grams.

Here are Top 5 Factors Why Indian Share Markets Rallied Today

Positive Global Cues: The positive sentiment of major global markets spilled on to the Indian market.

Most Asian markets traded in the green after the US Fed chair's dovish stance on the course of monetary stimulus and rate hikes.

The Hang Seng and the Shanghai Composite ended the day up by 0.5% and 0.2%, respectively. The Nikkei ended up by 0.5% in today's session.

Federal Reserve's Dovish Stance: US Fed chairman Jerome Powell's dovish stance seems to have boosted market sentiment. Powell hinted that the US central bank is not willing to quickly move towards raising rates.

The post-pandemic rally in the market has been mostly liquidity-driven and participants believe the market has more steam left as the liquidity tapering exercise is not likely to begin as early as was anticipated.

Dollar & Bond Yields Fall: The absence of a timetable for tapering caused US benchmark Treasuries and the dollar to slip.

The yield on benchmark 10-year Treasury notes was 1.3054% compared with its US close of 1.312%, and the dollar index, which measures the greenback against a basket of currencies, was around a two-week low.

Positive Macro Data: The foreign direct investment (FDI) into the country rose more than two folds to US$17.6 bn during April-June this fiscal on account of measures such as policy reforms and ease of doing business, an official statement said on 28 August 2021.

Total FDI inflow rose to US$22.5 bn during the first three months of 2021-22 as against US$11.8 bn in the same period last year. Total FDI comprises equity inflows, reinvested earnings and other capital.

FDI equity inflow grew by 168% in the first three months of 2021-22 (US$17.6 bn) compared to the year-ago period (US$6.6 bn).

Sectoral Performance: Gains were also seen as telecom, metal, and banking sectors witnessed huge buying interest today. The telecom sector ended the day up by 3.5% today, while the metal sector and banking sector ended their day higher by 2.6% and 2.1%, respectively.

We will keep you updated on how these factors develop in the coming days and what effect they have on Indian stock markets. Stay tuned!

Speaking of the stock market, India's #1 trader, Vijay Bhambwani, talks about how you should trade in the month of September, in his latest video for Fast Profits Daily.

Tune in to the video below to find out more:

In news from the auto ancillaries sector, Sandhar Tech was among the top buzzing stocks today.

Shares of Sandhar Technologies rallied 13% to Rs 294.3 on the BSE today on reports that US electric vehicle maker Tesla is in talks with at least three Indian suppliers to source critical parts as part of its plans to enter the Indian market.

The company is looking to source critical electronic, electrical and mechanical components, even as Sona BLW Precision Forgings (Sona Comstar), Sandhar Technologies and Bharat Forge are understood to be among the Indian firms already supplying components to it, the Economic Times reported.

The company is seeking critical electrical, electronic and mechanical components, the report said, citing people familiar with the matter.

The parts include instrument panels, windshields, differential brakes, gears and power seats.

Also, in the electric vehicle (EV) two-wheeler space, the company has already onboarded Ampere, Ather Energy, Revolt and Mahindra Electric among others in the e-mobility domain with talks progressively on with Ola- Electric as well.

Sandhar Technologies is a leading auto ancillary player primarily serving the Indian auto original equipment manufacturer (OEM) industry through a host of product categories, such as locking systems, Al die-casting and cabins (together form 57% of sales).

The company outperformed domestic OEM industry courtesy its multi-segment, multi-product, multi-client exposure.

Sandhar Tech share price ended the day up by 8.8% on the BSE.

Speaking of the current stock market scenario, note that the BSE smallcap index has surged 188% since the crash in March 2020.

Despite the index being up more than 1.8 times, Richa Agarwal, lead Smallcap Analyst at Equitymaster, believes smallcap stocks are set for a massive up move in 2021 and beyond.

Here's why...

The Smallcap to Sensex ratio, a metric referred to get a sense of relative valuations, currently stands at 0.48 times. To be sure, this is higher than a median of 0.43 times.

And yet, it's the lowest of all the peaks in the smallcaps so far. In the last cycle which peaked in January 2018, when the ratio touched 0.49, the peak was still 9 months away.

Here's what Richa wrote in a recent edition of Profit Hunter...

• When it comes to buying smallcap stocks, especially at this point in the rebound rally, you will need a bottom up approach, and a long term horizon.
  
  In fact, if you don't have the stomach to withstand a 20%-30% kind of corrections and volatility, this space may not be for you at all. And you should stop reading right here.

As per Richa, smallcaps are a great opportunity to make some big returns. But you need to stay disciplined when it comes to allocating money. And you need to be sharp when picking the right stocks.

Moving on to news from the telecom sector...

Bharti Airtel Board Approves Rs 210 bn Rights Issue

Bharti Airtel shares gained 5% on the BSE in the intra-day trade today after the telecom services provider announced Rs 210 bn rights issue.

In an exchange filing on Sunday, Bharti Airtel said,

• The rights issue is priced at Rs 535 per fully paid-up equity share, including a premium of Rs 530.
  
  Further, the rights entitlement ratio entails one equity share for every 14 equity shares held by eligible shareholders as on the record date.

As far as terms of payment of the issue price are concerned, 25% is to be paid on application, balance in two more additional calls as may be decided by the board or committee of the board, based on the company's requirements within an overall time horizon of 36 months.

The promoter and promoter group of the company will collectively subscribe to the full extent of their aggregate rights entitlement along with any unsubscribed shares in the issue.

While utilization of the issue proceeds has not been disclosed, this is the third fund raising round in the last three years after it raised a cumulatively Rs 420 bn in the financial year 2020 (37% dilution) through a successive issuance of rights, qualified institutional placement (QIP), and foreign currency convertible bond (FCCB).

Including the upcoming rights issue, it will be a cumulative 46% dilution in less than three years.

Bharti Airtel share price ended the day up by 4.4% on the BSE.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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