Fed cut effect! Sensex, Nifty zoom to lifetime highs as bulls run amok

Indian equity indices closed at all-time highs on Monday for the second straight day, riding the bullish momentum globally after the US Federal Reserve slashed interest rates by 50 basis points last week. Shares in rate-sensitive sectors such as banks, real estate, and auto led to the upsides.

Nifty gained 0.6% or 148.10 points to close at 25,939.05 while Sensex advanced 0.5% or 384.30 points to close at ₹ 84,928.61. Both indices rose over 2% in the last five sessions.

"The rally in the markets is largely driven by the rate cut by the US Federal Reserve on Thursday that reignited buying interest in lagging sectors such as banking, real estate, auto and metals since these sectors are rate sensitive," said Rohit Srivastava, founder of Indiacharts.com.

The market is anticipating that the Reserve Bank of India will follow suit and cut interest rates soon, he said. The Nifty is expected to move to 26,200-26,400 soon.

The Nifty PSU Bank index jumped 3.4% on Monday while the Bank Nifty rose 0.6%. Nifty Realty Index and Nifty Auto Indices gained 2.2% and 1.6%, respectively.

"The markets are in an exceptional bull run after the outsized interest rate cut by the US Federal Reserve," said Vaishali Parekh, vice president-technical research at Prabhudas Lilladher. "Since there is no sign of trend reversal yet, investors can buy on decline."

Bank Nifty could jump around 1,500 points higher from current levels, she said. The index closed at 54,105.80 on Monday. The Nifty Midcap 150 index rose 0.8% while the Nifty Smallcap 250 index gained 0.9% on Monday. In the last month, both indices gained 3.6% and 3.4%, respectively.

Foreign portfolio investors (FPIs) net bought shares worth ₹404 crore on Monday. Their domestic counterparts also purchased to the tune of ₹1,023 crore.

"Until the near-term support of 25,300 is broken, the rally is likely to continue with Nifty expected to be at 26,800 to 27,000 levels by the end of this year," said Parekh, adding that sector rotation is expected to be at play.

"The underlying trend is expected to remain bullish but there could be some pause and pullback due to some volatility in case of earnings expectations and outcome mismatch," said Srivastava.