Dear
Trader…
The BSE Sensex rose 1,440 points, or 1.77%, to 82,962. The Nifty
future gained 418 points, or 1.68%, reaching 25,415 and surpassing its previous
high of 25,420.
Meanwhile, the market capitalisation of all listed companies
on BSE surged by Rs 6.6 lakh crore to Rs 467.36 lakh crore.
US consumer prices rose slightly in August, but underlying
inflation showed some stickiness, data showed. That boosted the odds of a
25-basis-point Fed rate cut on September 18 to 85% from 66%, while the case for
a larger 50-bps reduction dwindled to 15% from 34%, according to CME FedWatch.
IT companies, which derive a substantial portion of their
revenue from the US, rose by 1.6%. Additionally, the Nifty Bank, Auto,
Financial Services, FMCG, Metal, Healthcare, Consumer Durables, and Oil &
Gas sectors all saw gains of over 1-3%.
Bharti Airtel, Reliance Industries, HDFC Bank, Infosys, and
ICICI Bank together added nearly 1500 points to the Sensex rally. L&T,
M&M, NTPC, and Kotak Bank were also significant contributors to the index’s
gain.
Bharti Airtel shares surged nearly 5% on Thursday, reaching
their 52-week high of Rs 1,650.75 on the NSE. The stock contributed to pushing
the BSE Sensex to its lifetime high of 83,116. The stock has remained unbeaten
over the last four trading sessions, rallying by nearly 7%.
Here are the key factors that led to today’s rally –
1) Rate cut optimism
US consumer prices in August showed a slight
increase, with core inflation rising by 0.28%, surpassing the expected 0.2%.
Despite this, market expectations of a 25-basis-point rate cut by the Federal
Reserve on September 18 jumped to 85%, up from 66% the previous day, according
to CME FedWatch. The chances of a more aggressive 50-bps cut dropped to 15%.
2) Oil decline below $72/barrel
Oil prices have dropped over 10% in September due
to weak Chinese demand and concerns about global oversupply. Despite a slight
recovery in today’s trade, with Brent crude futures for November rising 1.4% to
$71.61 per barrel and U.S. crude futures for October up 1.4% to $68.23, the
overall decline remains significant. Lower oil prices are positive for Indian
equities, as India is a major importer of crude oil. Reduced oil costs ease
inflationary pressures and help improve corporate margins, contributing to
today’s market rise.
3) Global market rally lifts sentiment
Indian equities also mirrored a global uptrend,
rallying in sync with global markets. Asian shares surged on Thursday, driven
by a tech rally on Wall Street and unexpected US core inflation data, which
reduced expectations of a large Federal Reserve rate cut. MSCI’s Asia-Pacific
index rose 1.5%, and the Nikkei gained 3.3%. European shares also advanced,
fueled by anticipation of another ECB rate cut, keeping borrowing costs near
2022 lows. European markets increased 1%, with tech stocks rising 2.5%
following Nvidia’s strong Wall Street performance.
4) Weaker dollar index
The dollar index, which tracks the movement of
the greenback against a basket of six major world currencies, declined below
the 102 level, currently at 101.72. This weakening of the dollar is positive
for Indian and Asian equity markets, as it makes emerging market assets more
attractive to foreign investors.
5) FII inflow boost
Foreign institutional investors (FIIs) continue
to play a key role in the Indian market’s strong performance. So far in
September, FIIs have infused nearly Rs 17,016 crore into domestic equities,
reflecting confidence in the resilience of India’s economy. Since June, FPIs
have been consistently buying equities, reversing their earlier outflows of Rs
34,252 crore in April-May. This steady inflow has bolstered market sentiment,
contributing to today’s positive momentum.
6) Possible rate cut in India
Analysts expect India’s consumer price index
(CPI)-based inflation to ease to between 3.2% and 4% for August, continuing the
trend of falling inflation seen in July, when it dropped to a 59-month low of
3.54%. This marks a significant decline from 7.44% in July 2023 and 5.08% in
June 2024.
Meanwhile, Latest
US inflation numbers are mildly positive for markets. August CPI inflation
coming at 0.2% has brought down the 12-month inflation to 2.5% from 2.9%
earlier. This paves the way for a rate cut by the Fed in September. But since
core inflation continues to remain high at 3.2% the Fed is likely to be
cautious and refrain from a 50bp rate cut, finally settling for a 25bp rate
cut.
CPI inflation in India also is expected to be low
at around 3.5% in August. This can facilitate a rate cut by the MPC in 2024
itself. In brief, the benign inflation conditions and prospects for rate cuts
are positives for stock markets.
Technically, the
important key resistances are placed in Nifty future are at 25356 levels, which
could offer for the market on the higher side. Sustainability above this zone
would signal opens the door for a directional up move with immediate
resistances seen at 25373 – 25474 levels. Immediate support is placed at 25202 –
25088 levels.
Past Performance is not an Indicator of Future Returns. The
securities quoted are for illustration only and are not recommendatory. Investment
in securities market are subject to market risks. Read Disclaimer and related
all the documents carefully before investing, mentioned on www.nikhilbhatt.in
