Interim Budget 2019: 5 factors that drove Sensex's 665-point rise in run-up

Markets gained ground on Thursday with the S&P BSE Sensex rallying over 665 points, or around 1.5 per cent, in intra-day deals. On the National Stock Exchange (NSE), the Nifty50 moved up around 1.3 per cent, or 140 points, to hit an intra-day high of 10,813.

Here are five factors driving the markets on Thursday:

Status quo by the US Federal Reserve: The US Federal Reserve held rates steady at the end of its two-day meeting, which ended Wednesday. The Federal Open Market Committee “will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate,” the central bank said in a statement Wednesday. READ MORE HERE

“FOMC statement and Powell’s press conference confirm our view that the Fed’s pause is, in reality, the end of the hiking cycle. We expect the Fed’s target range for the federal funds rate to remain unchanged for the remainder of the year, followed by rate cuts in 2020 as the economy starts to slide into a recession," said Philip Marey, senior market strategist at Rabobank International.

Supportive global cues: Asian stocks rose to a four-month high on Thursday after the US Federal Reserve pledged to be patient with further interest rate hikes, signalling a potential end to its tightening cycle amid signs of slowing global growth. MSCI's broadest index of Asia-Pacific shares outside Japan rose to its highest since October, while Japan's Nikkei moved up 1 per cent. READ MORE HERE

Interim Budget & fiscal prudence: Finance minister Piyush Goyal will present the Interim Budget 2019 on Friday. Though markets expect the proposals to have a populist undertone ahead of general elections scheduled for April / May 2019, they do not expect the government to sway significantly from the path of fiscal prudence.

READ MORE ON WHAT'S IN STORE FOR TAXPAYERS, ECONOMY AND INVESTORS

"There is a risk that the government may opt for a higher fiscal deficit target, at 3.2 per cent of GDP, for FY20, as against our forecast of 3.1 per cent. However, even with a farm package, we don’t expect the government to budget a deficit of 3.3 per cent of GDP or higher, as that would signal a pause or a deviation from fiscal consolidation. Outside of the farm sector, we expect a focus on micro, small and medium enterprises (MSMEs) and the middle class. We do not expect any big tax changes in the interim budget (if any, they will be announced in the final budget to be presented in June/July)," wrote Sonal Varma, managing director and chief India economist at Nomura, in a co-authored report with Aurodeep Nandi.

Rally in index heavyweights: Index heavyweights Infosys, Hindustan Unilever (HUL), HDFC Bank, HDFC, Reliance Industries, ONGC, Axis Bank and TCS rallied 1.8 per cent to 4 per cent in intra-day trade and helped push up the benchmark, the S&P BSE Sensex by over 665 points in intra-day deals. 

F&O expiry: Sentiment was also impacted by the rollover activity on account of expiry of the futures and options contracts for January series. According to an ICICI Securities report, only a couple of stocks were witnessing relatively low rollover into next series. 

"Nifty open interest (OI) in the near month series remains high and current OI of more than 15 million shares on T-1 is one of the highest seen on the day of settlement. Closure of these positions may induce VWAP activity in Nifty. However, the Nifty continued to witness fresh additions in the next series," the report said.