sensex and nifty surge on rate-cut optimism

The BSE Sensex opened over 400 points higher today, while the Nifty50 surged above the 25,000 mark.

Investors dialed back their expectations for a 50bp Fed cut next week after a somewhat hot CPI report. Overall CPI slowed to 2.5% in August YoY from 2.9% in July, Core CPI remained unch at 3.2% YoY as expected, but Core CPI rose 0.3% MoM vs +0.2% expected. Mkts now price in a… pic.twitter.com/ob3rNjfepg

— Holger Zschaepitz (@Schuldensuehner) September 11, 2024

The market rally was driven by several factors, including lower-than-expected US consumer price data, which increased the likelihood of a rate cut by the Federal Reserve. A significant drop in global oil prices also alleviated concerns about inflation, providing a further boost to market sentiment.

Shortly after open yesterday S&P 500 traded down 1.6% but then turned around and rose steadily for rest of day to close up 1.1%; 147 index points rally from intraday low to close was most impressive intra-day recovery since October 2022
⁦@SPDJIndices⁩ pic.twitter.com/HO9BcD5SHM

— Liz Ann Sonders (@LizAnnSonders) September 12, 2024

Positive trends in major global markets contributed to the buoyancy of Indian equities, as investor optimism spilled over into the domestic market. Foreign Institutional Investors (FIIs) have shown increased interest in Indian stocks, which is reflected in the substantial inflows and positive market sentiment. Speculations about a potential rate cut by the Reserve Bank of India have further fueled the bullish trend, with investors showing confidence in the country’s economic prospects.

150% per share dividend: Small cap stock up 44.57% in three months; ex-date on…https://t.co/mwxiPbUXPz

— ET NOW (@ETNOWlive) September 12, 2024

By the end of the trading session, both the Sensex and Nifty reached new peaks, reflecting broader buying support across all sectors. The Sensex closed at 82,962.71, up 1,439.55 points or 1.77 percent, while the Nifty ended at 25,388.90, up 470.40 points or 1.89 percent. All Nifty 50 stocks, except Nestle, ended in the green, with Hindalco, Bharti Airtel, and NTPC leading the gains.

Rate-cut fuels sensex and nifty surge

Sectoral indices also posted strong performance, with metals, automobiles, capital goods, technology, and power sectors surging between 2-4%. Analysts remain bullish on the market outlook, with Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas, stating that the Nifty has broken out of a sideways consolidation on the upside, starting the next leg of the upmove towards 25,500 – 25,700. Prashanth Tapse, Senior VP (Research) at Mehta Equities, believes that falling US bond yields and expectations of a rate cut by the US Federal Reserve in the next week’s policy meeting fueled optimism. Vinod Nair, Head of Research at Geojit Financial Services, noted that rate-cut optimism globally has provided positive impetus, and the domestic inflation and IIP data will influence the next leg of the rally, with corporate core earnings expected to improve in Q2. The market surge led to the market capitalization of all listed companies on BSE rising by ₹6.6 lakh crore, bringing the total to ₹467.36 lakh crore. Key contributors to the Sensex rally included Bharti Airtel, Reliance Industries, HDFC Bank, and Infosys, which together added almost 500 points to the index. This impressive market performance coincides with some positive economic indicators from the United States, with US consumer prices in August showing a slight increase and core inflation rising by 0.28%. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented that this paves the way for a rate cut by the Fed in September. The bullish sentiment is likely to sustain if positive economic indicators continue to emerge both domestically and internationally. Participants should focus on sectors and themes displaying consistent trends and prioritize large-cap and major midcap stocks for new buying opportunities.