InvestorQ : What was the reason for the Sensex rally by 800 points on Monday? Was it the package announced by the finance minister last week?
Mitali Bhutta made post

What was the reason for the Sensex rally by 800 points on Monday? Was it the package announced by the finance minister last week?

Answer
user profile image
Dawn Cherian answered.
1 year ago


Yes you are right. The reforms package did spur the Sensex higher. However, that was not the only reason as there were other supportive factors also that led to the rally.

· The package was the major issue driving the rally and the Rs.70,000 crore immediate disbursal for banks and the additional Rs.30,000 crore for HFCs actually led to a rally in financials.

· Short covering also played a big role. With most traders having accumulated short positions in banks, financial and FMCG stocks, most of the traders panicked after the aggressive package announced and that contributed to the rally.

· While the RBI decision to transfer Rs.176,000 crore came in post trading, the expectations were already rife in the market about a higher transfer. The impact may be felt in next few days as the fiscal deficit would be largely controlled.

· Trump made some statements referring to China being keen on trade talks. That also had a positive impact on markets as it hinted that the risk of trade war may be gradually receding in the world economy.

· Finally, the G-7 Summit saw steps towards rapprochement between the US and Iran at the intervention of Iran. If Iran is permitted to get back into oil markets based on commitments that should bring down oil prices further, benefitting India.

It was a combination of all the above factors that spurred the stock markets sharply higher on Monday.