4 Reasons Why Sensex Rallied 1,534 Points Today

Fri, 20 May Closing

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Bulls marked a strong comeback today as Indian share markets ended nearly 3% higher.

After opening the day higher, equity markets extended gains as the session progressed and ended near the day's high.

Benchmark indices erased previous day's losses and ended on a strong note as investors cheered positive global cues and buying returned to index heavyweight stocks.

At the closing bell, the BSE Sensex rallied 1,534, ending 2.9% higher.

Meanwhile, the NSE Nifty zoomed 457 points, ending at 16,266.

Dr Reddy's Laboratories and Reliance Industries were among the top gainers today. All stocks from the Sensex ended in green.

The broader markets ended on a strong note as the BSE Mid Cap index jumped 2% while the BSE Small Cap index increased 2.1%.

All sectoral indices ended in green with stocks in the metal sector, pharma sector, and banking sector witnessing most of the selling.

Shares of Welspun Corp and ESAB India hit their 52-week high today.

Outside the home ground, Asian share markets ended on a strong note after receiving positive cues from the central bank of China.

At the close in Tokyo, the Nikkei 225 advanced 1.3%, while the Hang Seng jumped 3.1%. The shanghai composite added 1.6%.

The SGX Nifty was trading 3.1% higher at the time of writing.

The rupee is trading at 77.49 against the US$.

Gold prices are currently trading up by 0.3% at Rs 50,711 per 10 grams while silver is trading up by 0.6% at Rs 61,959 per kg.

Here are four factors behind today's stock market rally:

China cuts key lending rates: The central bank of China announced a sharper than expected cut in its five-year loan prime rate (LPR) of 15 basis points. Although, the one-year LPR was left unchanged.

The five-year rates typically impact the pricing of mortgages. With the move, the authorities seek to provide a cushion for the economic slowdown.

The Chinese central bank has also pledged to provide support for the slowing economy but the room to easy policy could be constrained. The US Federal Reserve has raised interest rates thus too much easing could lead to massive capital outflows.

Recently, the Indian central bank also raised key rates. Here are 4 Companies that Stand to Win Big as Interest Rates Rise...

Strong Asian Markets: Asian peers cheered the decision of the Chinese central bank and traded on a robust note.

Investors have been concerned over the economic growth as the second-largest economy was hit by Covid-19 outbreaks leading to mobility restrictions and huge disruptions to trading activities.

Finance Minister's positive outlook: Indian Finance Minister, Nirmala Sitharaman, has stated that the country's economic growth is likely to be robust at 8.9% in the current fiscal year, the highest among all large economies.

This reflects upon the country's strong resilience and speedy recovery. In the statement issued, the minister also expressed confidence in the growth outlook for the next financial year.

Bargain hunting: The trading session witnessed solid bargain hunting after key benchmark indices had their worst daily fall since March 2020.

Despite being away from what analysts say are reasonable valuations, the domestic equity markets have heavily consolidated and eased valuations in the month of May. In fact, some bluechip stocks are available near 52-week lows.

Speaking of stock markets, Chartist Brijesh Bhatia explains why fear on the street is an opportunity in disguise, in his latest video for Fast Profits Daily.

How did the markets fair after hitting historical lows in years like 2008 and 2015? Have the markets hit their bottom amid the ongoing sell-off?

Brijesh answers all these questions and much more. Tune in to find out:

Also, Brijesh shared an update on the Nifty 50 index on his telegram channel today.

As per Brijesh, Nifty has reversed sharply forming the multiple lows at bullish reversal pattern.

Here's what he shared:

• As the fear is at extreme levels of years 2008-2009 and 2020, the recent dip is an excellent opportunity for investors to accumulate the best outperforming stocks.
  
  The dip yesterday to the low of 15,775 formed the higher low on charts. The higher low can be the stepping stone for the bulls in the reversal move.
  
  The Bullish Bat harmonic reversal pattern completed at 15,735 and the multiple lows forming in the range of 15,700-15,800 zone indicates the demand zone.
  
  The hurdle for bulls will always be the gap area marked in red on chart below, in the zone of 16,450-16,600.

Nifty 50 Daily Chart

 

• As Nifty is trading at 16,160, the minor hurdle for the day traders will be at 16,200-16,230.
  
  On the larger scale, the bullish hidden divergence on weekly and daily charts are indicating that bulls can expect the positive momentum in the coming weeks.

If you're interested in being part of Brijesh's charting journey as he shares how to create wealth from the profitable trade setup, join his telegram channel - Fast Profits Daily.

In news from the steel sector, Welspun Corp has bagged its single largest order in history for the supply of pipes worth over Rs 50 bn in the United States.

Welspun Corp is a one-stop service provider offering end-to-end pipe solutions. The new order is for supplying approximately 0.3 m MT of large diameter coated pipes for transporting natural gas from the Permian Basin to Houston.

The pipes for this order will be produced from the Little Rock plant in the US and the same will be executed over 12 months, commencing the second half of this financial year.

This huge new order from the US comes in after the company announced bagging two large orders in April 2022. One of these orders was from a long-standing customer in North America while another was from Australia.

After this order, the order book of Welspun as on date (excluding Saudi) stands over 7 m MT valued at Rs 105 bn.

Announcing the order, managing director and CEO, Vipul Mathur said:

• Our deep understanding of customer needs, quality orientation, and impeccable execution track record coupled with world class technology and innovation is what differentiates us.
  
  Our pan global order book and successive wins in a highly competitive environment validate our global leadership position in this market segment.

Welspun Corp share price ended 17.1% higher on the BSE today.

Coming to corporate earnings, automaker Ashok Leyland reported robust numbers for the quarter ended March 2022 supported by an increase in net realisation, favourable mix, and volume growth of 11% on year.

The automaker, focused on commercial vehicles, saw revenue grow 25% year-on-year (YoY) to Rs 87.4 bn.

EBITDA (earnings before interest, tax, depreciation, and amortisation) margin came in at 8.9%, expanding 124 basis points (bps) YoY.

EBITDA margin widened at a time when gross margin fell 135 bps.

Amid the high inflationary environment, the company implemented cost control measures. Other expenses, as a percentage of sales, declined to 8% from nearly 10% in December 2021 quarter. Also, employee costs as a percentage of sales dropped 73bps.

During the quarter under review, Ashok Leyland recorded a truck market share of 30.6%. This is the highest in the last 11 quarters, according to the company.

Ashok Leyland share price closed 6% higher on the BSE today.

Coming to stock specific developments, a jinxed Rs 50 bn slum rehabilitation project on RTO land in Andheri has been taken over by an Adani Group company, Portsmount Buildcon.

Barring Adani Green Energy, all Adani group stocks ended on a positive note today.

The Adani Group is an Indian multinational conglomerate founded by Gautam Adani in 1988. The group has grown at a robust pace in the last decade.

Moving on, Ethanol stocks were in focus today after the centre advanced its 20% ethanol blending target by five years.

The Union Cabinet on Wednesday this week advanced by five years its target for achieving 20% ethanol blending in petrol.

The amended National Biofuel Policy-2018 has now set the new target for 2025-26 instead of 2030, apart from allowing more feedstock for production of biofuels and export of biofuels in specific cases.

The National Biofuel Policy is aimed at reducing dependence on imports by encouraging fuel blending.

Since you're interested in ethanol stocks and biofuel companies, check out this page where we've listed everything you need to know about Indian biofuel companies.

And 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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