Sensex, Nifty Join Global Stocks Rally On Cooling US Inflation Prospects

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Stock Market India: Equities rallied after signs of sharply decelerating US inflation

Equity benchmarks started strong on Thursday, joining a broad global stocks rally after US inflation data became less hot than previously feared and prompted bets of less aggressive rate hikes from the Federal Reserve.

The 30-share BSE index was up 562.63 points, or 0.96 per cent, at 59,379.92 and the the broader NSE Nifty gained 147.05 points, or 0.84 per cent, to 17,681.80.
All the Sensex constituents were trading with gains in morning trade. Tech Mahindra was the top gainer in the pack, rising more than 3 per cent, followed by Wipro, Infosys, ICICI Bank, IndusInd Bank, TCS, Bajaj Finserv and Bajaj Finance.

As many as 46 Nifty 50 stocks traded in the green this morning, National Stock Exchange data showed.

Most of the NSE Nifty’s major sub-indexes traded in the positive territory.

Nifty’s IT index rose 2 per cent after tech-heavy Nasdaq closed 2.89 per cent higher. IT service providers Infosys, Tata Consultancy Services and Wipro were among the top gainers in the blue-chip Nifty 50 index.

“Tracking strong cues from Wall Street, the Nifty has advanced today to its highest level since April. The bullish momentum remains powerful, but the index has now approached a confluence of resistance near 17,800,” said Abhishek Chinchalkar, Head of Education at FYERS.

“Given the magnitude of the rally over the last few weeks, one must take a cautious stance on the Nifty until 17,800 is not surpassed. That said, if 17,800 is surpassed, the rally is likely to extend towards 18,100 in the days ahead,” he added.

Among other gainers, airlines InterGlobe Aviation and SpiceJet Ltd rose 2 per cent and 4 per cent, respectively, after the country’s civil aviation ministry lifted the fare caps it imposed during the COVID-19 pandemic.

International oil benchmark Brent crude was trading 0.23 per cent lower at $97.18 per barrel.

According to traders, the surge in the domestic equity markets was supported by a firm trend in global equities especially the US gauges and subsequent rally in Asian indices.

Market participants will now focus on the domestic Consumer Price Index (CPI) data due on Friday.

A Reuters survey of economists showed India’s retail inflation likely eased in July to a five-month low due to a fall in food and fuel prices but stayed well above the Reserve Bank of India’s upper tolerance limit of 6 per cent for a seventh consecutive month.

On Wednesday, Indian stocks were range-bound for the most part of the session as investors kept their exposure low due to weak global cues and ahead of the US inflation report.

That data showed, in contrast to June, when inflation increased monthly by 1.3 per cent, consumer prices in the US were constant in July. Due to a steep decline in the price of fuel, the July result fell short of forecasts, which led markets to reposition themselves in the belief that inflation had peaked.

Investors anticipate that if price increases have peaked, the US Fed won’t need to continue raising interest rates at such an excruciatingly rapid clip.

“US inflation data at 8.5 per cent in July will be a near-term boost to markets. Many market experts believe that the peaks of inflation and Fed hawkishness are behind us,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told ANI.

“The near-term texture of the market is likely to be bullish. But this need not sustain for two reasons. One, market valuations are high and this will attract profit booking. Two, details of the US inflation data reveal that inflation is unlikely to drift down steadily since wage growth and rents continue to rise,” he added.

Meanwhile, the rally in Indian stock indices has extended for three weeks on the return of foreign portfolio investors after nine long months of hiatus as well as inflation seemingly plateauing.

Foreign institutional investors (FIIs) were net buyers in the Indian capital market as they purchased shares worth Rs 1,061.88 crore on Wednesday, per the latest exchange data.

On the other hand, Wall Street equities rallied as traders priced in a 50 basis points Fed rate hike next month, compared with the 75 bps increase that had been expected before inflation report.

Both the S&P 500 futures and Nasdaq futures rose more than 0.3 per cent on Wednesday. The S&P 500 rose more than 2 per cent during the previous session while the Nasdaq Composite closed 20 per cent above its recent closing low in June.

The pan-European STOXX 600 index closed up 0.89 per cent and MSCI’s gauge of stocks across the globe gained 1.80 per cent.

That sentiment extended into early Asia trade on Thursday.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.0 per cent, driven by a 1.2 per cent jump in resources-heavy Australia, a 1.4 per cent gain in South Korea and a 1.2 per cent advance in Hong Kong.

Gains in Chinese shares were more subdued. Blue chips rose just 0.5 per cent as new COVID-19 lockdowns in more Chinese cities, including the eastern export hub of Yiwu, dented sentiment.

“Rising real yields, due to the Fed’s commitment to fighting inflation, have been an enormous problem for valuations in 2022, so any dovishness is seen as positive by the stock market, particularly for the highest valued companies,” Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors, told Reuters.

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