Bank Nifty hits 44,000 for first time. Here are the key triggers ahead

Global equities were mostly higher after data released on Wednesday showed consumer price index in November rose 0.1%, after advancing 0.4% in October. Economists polled by Reuters had forecast the CPI gaining 0.3%. The slowdown could lead the Fed to scale back the size of rate hikes at its policy meeting that ends on today. 

“The lower-than-expected November CPI inflation in the US which came at 7.1 % YoY and only 0.1% MoM confirms the market expectation that the Fed will hike rate by only 50 bps today. The consensus terminal Fed fund rate is now slightly below 5%, which is market positive. However, since recession in the US in 2023 is a high probability event, the market is unlikely to surge,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“In India, the bank index, and within the bank index the PSU bank segment, is the strongest segment and this can continue to remain resilient. HDFC twins exhibit strength. The recovery in the IT segment has some more steam to go. The resumption of FII buying is another positive. However, Nifty is unlikely to break out of the 18,400-18,800 range and sustain at higher levels. High valuations are likely to cap the rally,” he added.

Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS,” “We expect the US Fed to increase the benchmark rate by 50bps this week. Any hike lower than 50bps will be taken as positive for risk assets like EM equities, including Indian equities. Even with a 50 bps hike, if the Fed Chairman comments that future action of the Fed will be data dependent, then the market will take it positively. But, if he mentions that inflation remains a major risk and the labor market remains tight, with a possibility of a second round impact on inflation from the tight labor market, then the markets might react negatively.”

Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services, said:  “Nifty Bank continued its northbound journey, marking yet another new high on back of decline in inflation data that has fallen under the RBI’s mandated tolerance range of 2-6%. Rally continued in PSU sector especially mid-smallcap banks.”