Optimism swept through Stock markets as an in-principle agreement on the US debt ceiling was reached between the US president and House Republicans. The development provided near-term relief, with expectations that Congress would promptly ratify the agreement. The positive sentiment carried over from the US markets, which closed sharply higher during the previous trading session on Friday.

The Nifty, with gains of 0.54%, ended just short of the 18,600 mark and to the all-time high of 18,887.60 seen in December 2022. With gains of 0.55%, Sensex ended trading at 62,846.38. Foreign portfolio investors bought a provisional ₹1,758 crore on Monday.

India’s overall market value scaled past $3.3 trillion on Monday, benefiting from the recovery of Adani group’s stocks following a massive selloff triggered by short-seller Hindenburg Research’s report on 24 January.

The domestic benchmarks witnessed a strong rally and came close to their lifetime highs, primarily driven by positive global cues and robust predictions of domestic economic growth, said Vinod Nair, head of research at Geojit Financial Services.

Sustained FPI inflows and positive expectations on the macroeconomic trends such as robust gross domestic product (GDP) growth, inflation slowing sharply, and buoyant tax collections can provide fundamental support to the rally, analysts said.

An in-principle approval from US leaders for raising the US debt ceiling has generated optimism among global investors, who are now keenly watching the US Fed’s next policy plans and economic data points. Meanwhile, the higher-than-expected US personal consumption expenditure inflation rate raised the prospect of another rate hike by the Fed in its June meeting, Nair said.

Monday’s market rally was driven by robust demand for metal, realty, and financial sectors, resulting in the Bank Nifty scaling fresh record highs at 44,483.35. However, profit booking in IT stocks and pressure on pharma stocks tempered the overall market performance. All other sectoral indices closed in the green, with mid-cap and small-cap indices reaching 52-week highs.

“The investors at large are getting more active on mid- and small-caps, where there has been a good momentum built in the last few weeks,” said Sandeep Gupta, senior group vice-president and head of dealing and advisory, broking and distribution, Motilal Oswal Financial Services Ltd. Gupta added there has also been some buying of mid-cap IT stocks after Nasdaq showed a strong recovery in the last few months, approaching its 52-week high levels.

Banking stock gains are being led by good earnings momentum being witnessed by lenders.

“We feel rotational buying across sectors would help the index to maintain the positive tone, and any intermediate dip due to global cues should be considered as a buying opportunity,” said Ajit Mishra, vice-president of technical research at Religare Broking Ltd. Mishra reiterated his preference for leading sectors like banking, financials, auto and FMCG and suggested staying selective in others.

Analysts expect the uptrend in Nifty to continue and expect it to head toward its record-high levels on the back of positive global cues, consistent FPI buying, and healthy corporate earnings.

Jatin Gedia, a technical research analyst at Sharekhan, said that both price and momentum indicators are pointing towards a continuation of the positive momentum.

“Overall, from a short-term perspective, we expect the Nifty to target levels of 18800,” said Gedia.

Meanwhile, the UK and US markets were shut on Monday. The rupee closed six paise weaker at 82.63 to a dollar.

“Over this week, the focus will be on the US jobs data, and we expect range-bound price action in USD/INR, between 82.30 and 82.80 on the spot,” said Anindya Banerjee, vice president of currency derivatives and interest rate derivatives at Kotak Securities Ltd.

Updated: 30 May 2023, 12:24 AM IST