Asian signals and foreign money flows lead to a ‘Santa Rally’ on D-Street

Mumbai: Indian stock indexes rose on Monday, tracking gains in the rest of Asia, as the rupee’s recovery and renewed foreign flows last week revived sentiment. NSE’s Nifty rose 206 points, or 0.8%, to close at 26,172. BSE’s Sensex rose 638 points, or 0.75%, to end at 85,567. Elsewhere in Asia, Japan rose 1.8% as the yen fell to a near record low, even after the country’s central bank raised its policy rate by a quarter point on Friday to a three-decade peak of 0.75%. China advanced 0.7%, Hong Kong rose 0.4%, South Korea rose 2.1% and Taiwan rose 1.6%. The pan-European Stoxx 600 index fell 0.15%.

Domestically, the broader market also showed strength, with analysts labeling the upward move as a ‘Santa rally’ – the market’s tendency to move around Christmas and early New Year.

“The last few weeks of the calendar year are typically associated with a Santa Rally, where midcap and smallcap stocks tend to outperform,” said Rajesh Bhosale, Equity Technical Analyst at Angel One. “This trend has already started to manifest itself in the past two sessions.”

The Nifty Midcap 150 gained 0.8% and the Nifty Small-cap 250 rose 1%. Of the total 4,501 shares trading on the BSE, 2,768 advanced and 1,551 declined at the close.

FPIs sold net shares worth ₹457 crore, while domestic institutions were buyers worth ₹4,058 crore.

In the last three trading sessions, foreign investors bought Rs 4,000 crore after selling Rs 19,500 crore till December 16. The rupee is now trading below the Rs 90 level after recovering in the last two sessions. Dharmesh Shah, Head of Technicals at ICICI Securities, is bullish on the market. “The Nifty has found support near its 50 Day EMA (exponential moving average) around the 25,700 level several times, reflecting the underlying strength of the index,” he said. IT stocks led gains on Monday as the Nifty IT index rose over 2%.

“Strengthening rupee against the dollar is a major driver of the rally in terms of sentiment,” said Gaurav Sharma, head of research at Globe Capital Market. “There was a good buying round among IT majors like Infosys, TCS, HCL Tech, Tech Mahindra and Wipro.” Shah expects the Nifty to move towards the 26,700 zone by January. Strong support is seen at 25,700, and a buy on dips strategy is advisable, he said.