Sensex hits 78,000: 3 reasons that led to 712-pts rally on BSE benchmark

The NSE Nifty crossed the 23,700 level for the first-time ever; while the Nifty Bank index zoomed past 52,700 levels.

Sensex, Nifty hit record highs: Equity market in India hit fresh all-time highs in trades on Tuesday led by a strong rally in large-cap private banking shares. 

The S&P BSE Sensex rallied past the 78,000-mark for the first-ever time and registered a summit at 78,105. It settled at 78,053, up 712 points or 0.92 per cent. 

Similarly, the NSE Nifty50 climbed above the 23,700 level for the first time to touch a record high of 23,735.5. It ended with gains of 183 points or 0.78 per cent at 23,721 level. 

The broader BSE MidCap and SmallCap indices, however, slipped in trade, closing 0.26 per cent and 0.03 per cent, respectively. 

 

Sectorally, the Nifty Bank index zoomed past the 52,000-mark to scale a high of 52,746.5. The Banking index ended 1.7 per cent higher.

Here are the three reasons that led to Tuesday's sharp rally:

June F&O expiry: With the new government in place, hopes of continuity in reforms and focus on its 100-day agenda, traders are seen taking bullish bets in the futures & options space.

With less than three days to go for the June series expiry, the Nifty Put Call Ratio (PCR) stood above 1; indicating presence of more put writing as against call writing. The highest OI was visible in 24,000, 24,500 and 25,000 Strike Calls.

Similarly, traders seemed to be a confident lot, with steady stock futures rollovers to the July series.

Private Banks lead: Shares of private lenders which were seen underperforming state-run peers seem to be back on investors' radar. Banking shares hold significant weightage in the benchmark indices - the Sensex and the Nifty - hence a sharp movement in this shares, tends to impact the indices accordingly.

On Tuesday, Axis Bank and HDFC Bank rallied nearly 3 per cent each to Rs 1,267 and Rs 1,717, respectively. ICIIC Bank rallied over 2 per cent. SBI and Kotak Bank were up around a per cent each.

FIIs up long bets in F&O: Following finalization of the government at the Centre, foreign institutional investors have covered their short positions, and steadily build long positions in the index futures. As of June 24, FIIs net long in index futures rose to 1.44 it’s highest in more than two months. FIIs held 59.08 per cent net longs in index futures. 

FIIs have been net buyers in index futures in the last seven straight trading sessions. FIIs have added around 1.83 lakh across index futures, which include Nifty, Bank Nifty and others.

Outlook: Technically, the NSE Nifty seems on course to test the super trend line resistance on the daily chart at 23,850-odd levels; above which the index can extend the rally beyond 24,000-mark.

The BSE Sensex is closing in on a crucial Fibonacci resistance at 78,150 levels. The index will need to cross this, in order to open the doors for further upside in the year ahead.