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Sensex reclaims 61,000, Nifty tops 18,100 -- what is driving the market rally?

The Indian benchmark equity index Sensex reclaimed the key 61,000-point mark, while the Nifty hit the 18,000 mark on November 7. The domestic equity market remained volatile but turned positive over the last few sessions, gaining momentum since the second half of October.

The gains in Indian equities come on the backdrop of positive global cues as well as strong domestic fundamentals. A rise in the US and Asian markets, strong September quarter for domestic corporate earnings, and decent growth in key macro indicators, among others, have fuelled optimism in Indian markets.

Asian stocks traded higher as investors digested the latest US jobs report and looked ahead to the midterm elections. The US stocks gained on Friday amid hopes that the Federal Reserve would scale back future interest rate hikes following the latest jobs report.

Expectations that the US Fed may look to slow the pace of interest rate hikes have augured well for the markets. This may have led to returning of foreign investors that reduced their holdings over time.

Foreign Institutional Investors (FII) also seem to have returned to the Indian markets despite the US Federal Reserve increasing interest rates to fight inflation. FIIs bought $2.74 billion in Indian equities between October 20 and November 2, as per the data available on the NSDL. So far in November, FIIs have poured in Rs 6,160.11 crore into Indian markets, data from National Stock Exchange showed.

Moreover, better-than-expected September quarter earnings from India Inc is likely to have boosted investor confidence. The banking sector has reported robust performance with decent growth in demand for loans, while the IT sector showed margin recovery.

On the macroeconomic front, the fundaments also seem to have improved. The US posted strong third-quarter GDP numbers with a growth of 2.6%, boosting investor sentiment globally.

Domestic macro numbers have also shown resilience. The Index of Industrial Production (IIP) grew 7.9% in September as compared to a revised rate of 4.1% in August, which was at a seven-month low.

The latest data released by the government shows India’s manufacturing PMI rose modestly to 55.3 for October, from 55.1 in September, continuing to outperform the regional trend. The GST collection in October was also the second highest ever at Rs 1.52 lakh crore.

Automobile sales growth in October was also robust, with many carmakers recording the highest-ever monthly sales amid the festive season. Total vehicle retail sales for the month of October 2022 grew 48% year-on-year (YoY). All vehicle categories, including two-wheelers, three-wheelers, passenger vehicles (PV), commercial vehicles (CV) and tractors, registered robust sales growth.

The primary market is expected to continue to see more action as four more initial public offerings (IPOs) will open for subscription this week. The IPOs of Archean Chemical Industries, Five Star Business Finance, Kaynes Technology India, and Inox Green Energy Services will hit the market looking to cumulatively raise around Rs 5,020 crore.

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