The BSE Sensex and Nifty 50 rose over 1.5% to new all-time highs, outperforming the gains in the Sensex and Nifty. Global MarketPossibility of increase in foreign investment Indian Equities It has strengthened after the release of US inflation data, which has increased the possibility of a 25 basis point cut in interest rate by the US Federal Reserve.
According to ET report, the market capitalisation of all companies listed on BSE increased by Rs 6.6 lakh crore to Rs 467.36 lakh crore.
Data showed a modest increase in U.S. consumer prices in August, but underlying inflation showed some stagnation. This development increased the probability of a 25-basis-point Fed rate cut on Sept. 18 from 66% to 85%, while the probability of a larger 50-bps cut fell from 34% to 15%, according to CME FedWatch.
IT companies, which earn a large portion of their revenue from the US, saw a growth of 1%. Besides, Nifty Bank, Auto, Financial Services, Healthcare and Oil & Gas all saw a growth of more than 1%.
Bharti Airtel, Reliance Industries, HDFC Bank and Infosys collectively contributed nearly 500 points to the Sensex rally. L&T, M&M, NTPC, ICICI Bank and SBI also contributed significantly to the index’s gain.
Bharti Airtel shares surged nearly 5% on Thursday, hitting its 52-week high of Rs 1,650.75 on the NSE. The stock played a key role in pushing the BSE Sensex to a record high of 82,774.9. In the last four trading sessions, the stock has gained nearly 7%.
According to Narendra Solanki, Head – Fundamental Research – Investment Services, Anand Rathi Shares and Stock Brokers, this is a much needed boost for the market.
He said, “Indian markets opened in the green on the back of a positive trend in Asian markets buoyed by a technology-led rally on Wall Street overnight. Markets gained further strength during the afternoon session and traded higher as traders bought large-cap stocks. The markets further strengthened on news of China cutting rates by 50 basis points on $5 trillion of mortgages to boost consumption earlier this month, giving the markets a much-needed emotional boost.”
Why did BSE Sensex and Nifty 50 rise today?
Several key factors contributed to today’s rally, including expectations of interest rate cuts, oil prices falling below $72 a barrel, bullish improving sentiments in global markets, weak dollar index, increased FII inflows, and possibility of interest rate cuts in India.
US consumer prices and rate cut expectations
A modest increase in US consumer prices in August, with core inflation rising 0.28%, has led to a change in market expectations about the Federal Reserve’s upcoming rate decision. Despite the higher-than-expected 0.2% rise, the probability of a 25-basis-point rate cut on September 18 has risen to 85%, while the probability of a more aggressive 50-bps cut has fallen to 15%. Experts suggest that the Fed is likely to remain cautious due to persistently high core inflation at 3.2%, eventually settling for a 25 bp rate cut.
Fall in oil prices
Oil prices have seen a significant decline in September, falling more than 10% due to weak demand from China and concerns of oversupply globally. This decline is positive for Indian equities, as India is heavily dependent on crude oil imports. Lower oil costs help reduce inflationary pressures and improve corporate margins, which is the reason for the recent market surge in India.
Global market boom
Indian stock markets have rallied along with global markets, mirroring the rally seen in Asia and Europe. Technical bullishness on Wall Street, unexpected US core inflation data and anticipation of another ECB rate cut have contributed to the positive sentiment in global markets. The weakening of the dollar index below the 102 level has also made emerging market assets more attractive to foreign investors.
FII flows and market sentiment
Foreign institutional investors (FIIs) have been buying shares continuously since June, in September alone they invested around Rs 17,016 crore in the domestic stock market. This steady investment has strengthened market sentiment and contributed to the positive momentum in the Indian market. The reversal of withdrawals seen earlier in April-May reflects foreign investors’ confidence in the resilience of India’s economy.
Possible interest rate cuts in India and their impact
Analysts expect India’s Consumer Price Index (CPI)-based inflation to ease to between 3.2% and 4% in August, continuing the downward trend in inflation seen in recent months. This benign inflationary situation and the prospects of rate cuts by the Monetary Policy Committee (MPC) in 2024 are being considered positive for the Indian stock market.
