The benchmark indices on Dalal Street have experienced a significant rally, with the Sensex and Nifty 50 rising dramatically in just two trading sessions. The Nifty 50 reclaimed the 23,000 mark on Friday, reflecting a robust increase of approximately 2 per cent. This upswing continued into the second day, despite prevailing uncertainties in the macroeconomic environment, including high crude oil prices at $117 per barrel and ongoing geopolitical tensions related to the US-Iran conflict.

On Thursday, the Sensex had already gained 905 points, and it added another 592 points, or 0.79 per cent, during intraday trading today. This brings the total increase over the two days to 1,497 points. The Nifty 50 also reached a high of 23,118, rising by 181 points or 0.79 per cent in intraday trading, marking a total rally of 1.8 per cent over the same period.

Factors Driving Optimism on Dalal Street

One of the key drivers of this market optimism is the positive sentiment surrounding corporate earnings for the ongoing September quarter. Despite some cost pressures, reports indicate that earnings have been healthy. According to Jefferies, a global investment bank, the upgrade ratio for earnings remains above 50 per cent for this quarter. Of the 105 companies analysed, 56 per cent exceeded performance expectations, contributing to a favourable outlook.

Jefferies has also revised its earnings estimates for FY27 MSCI India upwards by 1 percentage point to 15 per cent, although some major companies have yet to report their results. This optimistic earnings outlook has played a significant role in boosting investor confidence.

Additionally, the performance of the IT sector has been bolstered by a positive Q2 and a reversal in global artificial intelligence (AI) trade. This has led to a surge in traditional Indian IT services companies, resulting in the Nifty IT index achieving its best monthly performance in six years, with a 2 per cent rise in intraday trading. An analysis by Business Standard revealed that the Nifty IT index has risen by 14.8 per cent so far in October, marking the largest increase since July 2020.

Technical Indicators Suggest Strength

Technical analysis also indicates a strengthening market, as noted by Devarsh Vakil, head of prime research at HDFC Securities. The Nifty has successfully broken out of a narrow trading range of 22,400 to 22,800 that had constrained price movements over the previous five sessions. The previous swing high and the 50-day exponential moving average converge near the 23,175 level, which is now identified as a key resistance zone.

Support levels have shifted higher to 22,650, and as long as the Nifty maintains its position above this threshold, traders are advised to retain a positive bias. This technical outlook, combined with strong earnings and sector performance, contributes to the prevailing bullish sentiment on Dalal Street.

In summary, the recent surge in the Sensex and Nifty 50 reflects a confluence of positive earnings reports, strong sector performance, and favourable technical indicators, despite ongoing macroeconomic challenges. Investors remain cautiously optimistic as they navigate these market conditions.

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