 "Sensex, BSE, stock markets")
Latest inflation readings from India and the US, reflecting slowing pace of growth in consumer prices, lifted sentiment at Dalal Street on Wednesday. After a gap-up start, the BSE Sensex benchmark was trading 600 points higher at the day's high of 65,579.
The Nifty50 index gained 180 points to hold above 19,600 mark. Among sectors, Nifty Realty index rose nearly 3 per cent, followed by a 2 per cent jump in the IT pocket.
Financials, Metal and oil & gas indices also held firm gains. Defensives like FMCG and pharma indices were relatively tepid.
A soft inflation reading, especially in the US, led to the strong rally in the domestic and global markets as investors grew confident the Fed may wrap its rate hike cycle, which will also taper the hot treasuries.
Calling the US inflation data a "game changer for the market", V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said the Fed is done with rate hikes and the timeline for rate cuts in 2024 will likely be sooner than expected.
"Short covering can add to the rally. FIIs are likely to turn buyers, lest they miss out on the rally in the best performing large economy in the world. Leading financials, which were weighed down by FII selling will bounce back. Decline in CPI inflation in India is also favourable," Vijayakumar said.
Financials, automobiles, real estate, cement and platform digital companies will attract investment from DIIs, HNIs and retail investors. The tug of war between FIIs and DIIs is clearly in favour of DIIs, he added.
Below is a wrap on why markets surged on Wednesday:
Easing inflation: Domestic consumer price index (CPI)-based retail inflation rate declined to a five-month low of 4.87 per cent in October from 5.02 per cent in September. In the US, CPI rose 3.2 per cent YoY, below estimates.
On a monthly basis, prices did not see any uptick from September an remained flat, boosting risk appetite on hopes of no more Fed rate hikes ahead.
On a monthly basis, prices did not see any uptick from September an remained flat, boosting risk appetite on hopes of no more Fed rate hikes ahead.
Global market rally: US equities favorably assessed the inflation reading as the benchmark indices (Dow Jones, S&P 500 and Nasdaq) surged up to 2 per cent on Tuesday night. This move was aided by an ease in 10-year treasury yields, which cooled to three-month lows of 4.4 per cent from highs of 5 per cent seen last month.
Hong Kong's Hang Seng surged 3 per cent today, leading gains in Asia, after China reported upbeat economic data. Retail sales in China grew 7.6 per cent in Oct from a year ago. A Reuters poll had pegged this at 7 per cent.
Industrial production rose 4.6 per cent on-year than expectations of 4.4 per cent growth. Japan's Nikkei and Korea's Kospi also jumped up to 2.6 per cent.
Global optimism: The Israel-Hamas war has remained contained in the region, allowing crude oil to retreat to $79-$83 range recently from highs of $96, leading to cheer among Indian investors. Besides, a number of global brokerages have upgraded India to 'overweight' in the last month.
Goldman Sachs, early this week, gave an ‘overweight’ (OW) stance on domestic equities as it "believes India has the best structural growth prospects in the region and offers mid-teens earnings growth over the next two years".
JP Morgan, Morgan Stanley and Nomura have also recently upgraded their India ratings to 'overweight' whereas CLSA has increased its India portfolio allocation by 20 per cent.
