Nifty Jumps Nearly 500 Points on Jan 2; What’s Driving The Rally?

The Nifty index experienced its largest single-day gain in six weeks on Thursday, January 2, surging nearly 500 points during the trading session. This marked a significant move after a 12-day consolidation period.

The index crossed key levels of 23,800, 24,000, and even 24,100 before closing 425 points higher at 24,168. The last time the Nifty saw such momentum was on November 22.

Key Drivers Behind the Rally

Foreign Institutional Positioning

Foreign Institutional Investors (FIIs) held net longs of just 13.5% as of Wednesday’s close, reflecting low exposure to the market. FIIs remained net sellers in the cash and futures markets, leaving room for a short-covering rally.

Weekly Expiry Impact

Thursday’s rally coincided with the weekly expiry of Nifty options contracts. Call writers had expected 24,000 to act as a resistance, evident from heavy writing at the 24,100 call strike. However, as the index convincingly breached 24,000, traders were forced to cover their shorts, amplifying the rally.

Volume Surge Post Midday

Trading volumes, initially subdued, surged after 12:30 PM, with the number of contracts traded on the Nifty rising 20% above its 20-day average. This late surge in activity provided additional momentum to the rally.

Top Performers Driving the Index

1. Infosys shares emerged as the top performer in the Nifty, surging 4.5%, its largest single-day gain in seven months, contributing 73 points to the index’s rise. Mahindra & Mahindra (M&M) share price continued its upward momentum from Wednesday, adding 33 points with a 4% gain driven by strong December auto sales.
2. Bajaj Finance share price saw a 7% increase, while Bajaj Finserv share price jumped 9% after Citi initiated a 90-day positive catalyst watch on Bajaj Finance, contributing 33 points to the index.
3. Maruti Suzuki share price, benefiting from strong December sales data, rose 5.5%, adding 23 points to the Nifty. Reliance Industries share price, despite recent underperformance, posted a near-2% gain, helping the index with a 21-point contribution.

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