Sensex Reclaims Mount 28k, RBI Rate Cut

Hope Fuels Rally

The S&P BSE Sensex galloped over 400 points in Mondays trade, led by gains in HDFC,
HDFC Bank, Maruti Suzuki India, M&M and L&T. The Nifty50 reclaimed its crucial
level of 8,700 on the back of gains in realty, oil & gas, power, consumer durables, metal,
capital goods and banking stocks.
The benchmark indices have recovered most of their losses incurred last Thursday after the
Indian Army claimed surgical strikes on terror bases in Pakistan, elevating geopolitical
LOC tension. DGMO Lt Gen Ranbir Singh had informed the media that things were in
control after the surgical strikes and also the Indian Army was prepared for further
hostilities across the border.
The aura of the Dalal Street is buzzing with the following factors which happened to fuel
the domestic market on Monday:

The hope of a rate cut by the RBI on Tuesday:

Firstly, the hope of a rate cut by the RBI - Reserve Bank of India on Tuesday could have
been one factor fuelling the rally on the Dalal Street.
A total of 14 out of 18 banks and financial institutions expect RBI to cut rates, while the
remaining feel that the rates might remain unaltered as the nation steps into the league of
developed countries by having a panel to decide upon policy rates. Retail inflation, a key
reason which the central bank (RBI) considers in deciding policy rates, was at 5.05 percent
in the month August, the lowest in 6 months.

Contraction in India VIX Volatility Index:

A sign which brings solace to the bulls is the contraction in India VIX Volatility Index.
The India VIX, a measure of the markets shortterm expectation of volatility, contracted
6.7 percent on Friday to 16.02 from 17.18 recorded in the last session. However, there
still remains a hangover of the steep 33 per cent spike witnessed in the volatility index

(VIX) last session, which hasnt left the minds of the market participants. The comfort
would return to the market if India VIX cools below 15.50.

Technical reasons:
The Nifty50 was able to break above its crucial psychological level of 8,700 in trade,
which is a sign of optimism. Now, even if the index pares intraday gains and settles above
the 8,688 level (which has become a stiff hurdle for the Nifty50), it shall still be an
optimistic inkling for the bulls.
According to market experts and stock analysts, the index has to now cross and stand
stable above the 8,688 level to get relief or bounce back towards 8,767 and followed by
8,820 levels. The analysts added that if the index fails to hold above the 8,558 mark, then
it might commence to decline towards the 8,400 level.

Robust growth in sales of automobiles:

Auto stocks galloped up to 6 per cent after Maruti Suzuki, M&M, Eicher Motors, reported
a robust sales growth in the month of September. S&P BSE Auto Index proved to be the
largest sectoral gainer in Mondays morning session, rising close to 2.5 percent.

The Deutsche Bank effect:

On Friday, the domestic market received a strong handover from the US markets. After
media reports stated that the Deutsche Bank was negotiating a much smaller fine with the
United States Department of Justice, the Asian markets too began trading higher. The Dow
Jones Industrial Average zoomed 164 points, or 0.91 percent, to 18,308 in Friday's trade.
The Nasdaq Composite climbed 42 points, or 0.81 percent, to 5,312.The S&P500 index
ascended 17 points, or 0.8 percent, to 2,168.

Disclaimer
The investment advice or guidance provided by way of recommendations, reports or other ways are solely the personal views of the
research team. Users are advised to use the data for the purpose of information and rely on their own judgment while making
investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022

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Article Written by
Salman Hashmi