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Friday, February 26, 2021

Explained: Why have markets surged after Budget Day rally and what to expect now

Even as the markets kept up the momentum gained from the Union budget presented on Monday, the most spectacular movement has been witnessed in the bank index which rallied by almost 3.50 per cent in Tuesday's session compared to a 2.5 per cent rise in Sensex and Nifty.

Written by George Mathew , Edited by Explained Desk | New Delhi |
Updated: February 4, 2021 11:04:13 am
Explained: Why the Sensex plunged 1407 points todayThe buoyancy continued for the second consecutive session as participants continued to give a thumbs up to the Union Budget.

The bull rally on the stock markets continued for the second day in a row on Tuesday as the investor community ramped up purchases in the post-Budget buying euphoria. After the five per cent gain on Monday, the Sensex soared by another 2.5 per cent, or 1,197 points at 49,797.72 and the NSE Nifty Index shot up by 367 points, or 2.57 per cent, to 14,647.85 on strong bull support.

The Sensex has now gained 3,500 points in the last two sessions and recovered fully from the sell-off witnessed last week. Even as the markets kept up the momentum gained from the Union budget presented on Monday, the most spectacular movement has been witnessed in the bank index which rallied by almost 3.50 per cent in Tuesday’s session compared to a 2.5 per cent rise in Sensex and Nifty.

What expains the post budget surge, given the B-day surge?

The rally was pronounced in sectors like banking, infra and auto. “The rally was broad based and derived its basic premises from the growth-oriented proposals in the budget across various key sectors of the economy, putting the emphasis on self-reliance and transformation into one of the fastest growing economies of the world,” said Joseph Thomas, Head of Research, Emkay Wealth Management.

“The start of a new rally was noticed in sectors like banking, infra and auto, supported by a renewed traction provided by a growth-oriented budget. After consecutive selling by FPIs last week, the market witnessed a reversal in trend becoming net buyers post the budget. Positive global sentiments ahead a new US Covid support bill also lifted the market,” said Vinod Nair, Head of Research at Geojit Financial Services.

The buoyancy continued for the second consecutive session as participants continued to give a thumbs up to the Union Budget.

Good numbers from auto companies aided the sentiment. Consequently, the Nifty ended on a strong note, up by 2.6 per cent at 14,648 levels. All the sectoral indices ended in positive with auto, banks and capital goods were the top gainers. The broader market indices traded in tandem and gained in the range of 1.6-2.3 per cent.

RBI’s policy review

“Now as the budget is behind us, all eyes will be on the RBI monetary policy outcome scheduled on Friday. Meanwhile, as more corporates announce their results, stock-specific volatility would remain high. Markets may see a breather after the recent surge but the bias would remain on the positive side,” said Ajit Mishra, VP – Research, Religare Broking Ltd.

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Ruchit Jain, Senior Analyst, Angel Broking, said, “bulls have regained complete control and have recovered the recent losses within no time. This is the usual characteristic of a strong bull market and the banking space today continued to lead this uptrend. Nifty is just a few points away to reclaim new highs and it is all set to once again enter unchartered territory.” Stock specific moves were mesmerizing as many stocks have rallied sharply in these couple of sessions, Jain said.

“Going ahead, we expect this uptrend to continue, although the velocity of the upmove could not be the same as seen in the last two days. However, one should continue to be with the trend and look for stock specific trading opportunities as many potential moves are providing good opportunities with high returns to traders,” Jain said.

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