Indices gain amidst fed rate cut optimism; IT, financial stocks lead

Benchmark indices Sensex and Nifty gained about half a per cent on Tuesday, mirroring gains in the global markets, amid growing optimism that the US Federal Reserve will cut interest rates next month. Financial and information technology stocks lead the rally. 

The 30-share BSE Sensex ended the session at 80,803, gaining 378 points or 0.5 per cent. Nifty gained 126 points or 0.5 per cent to end at 24,699. The total market capitalisation of BSE listed firms rose by Rs 2.5 trillion to touch Rs 457 trillion.

Markets were buoyant after the latest data on jobless claims and retail sales in the US supported hopes that the world's biggest economy is on its path in taming inflation while seeing healthy economic growth.

 

The latest data on US unemployment benefit applications revealed that jobless claims fell for a second week to the lowest since early July.

The initial claims declined by 7,000 to 227,000 for the week ended August 10.

 

The US retail sales have risen the most since early 2023, revealing that demand is increasing despite higher borrowing costs and an uncertain economic outlook.

The recent statements of US monetary policy officials further boosted optimism about an imminent rate cut by the Federal Reserve.

Analysts said the latest data had eased fears of slowing economic growth in the US.

The India Vix, a gauge of market volatility, fell by 3.5 per cent to 13.8 per cent. The volatility gauge on Friday had ended below 15 for the first since August 2.

“After consolidating at higher levels over the last few days, Nifty saw recovery amidst global market recovery, and we expect this momentum to continue in the near term. The broader market is expected to continue its outperformance, which is supported by sectorial rotation. All eyes will be on the US FOMC meeting minutes, which will be released on Wednesday,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

The broader Nifty Midcap 100 rose by 0.8 per cent, and the Nifty Small Cap 100 rose by 0.5 per cent. The market breadth was strong, with 2,371 advances and 1,561 declines.

"The Nifty has reached its initial target of 24,700, and the current trend appears poised to continue. While all major sectors are participating, a sustained recovery in key banking stocks is essential to drive the index toward a new record high. We maintain our recommendation to adopt a ‘buy on dips’ strategy and stay focused on stock selection,” said Ajit Mishra, SVP of research for Religare Broking.

Going forward, the initial jobless claims and home sales data from the US. Investors will track the statements of Bank of Japan's Chief Kazuo Ueda and Federal Reserve's Jerome Powell. 

Reliance Industries, which rose 0.5 per cent, and HDFC Bank, which rose 0.4 per cent, were the biggest contributors to the Sensex gains.

Financial Services and Utilities stocks gained the most, and their sectoral index on BSE rose 1.2 and 1.09 per cent, respectively.

Foreign Portfolio Investors were the net sellers to the tune of Rs 1,458 crore on Tuesday, while domestic institutions bought shares worth Rs 2,252 crore.