Markets scaled fresh highs on Wednesday despite inflation woes denting global investor sentiment. The Nifty closed above 18000-mark for first time ever. The 50-share index was up 169.80 points or 0.94% at 18,161.75. The Sensex was up 452.74 points or 0.75% at 60,737.05.
Markets in other Asia-Pacific region were mostly mixed with shares in mainland China and Korea rise 0.4-1%. Trading in Hong Kong was cancelled due to a typhoon warning alert.
Vinod Nair, head of research, Geojit Financial Services said, “The mood of the global market is muted by inflation fears and high bond yields ahead of the release of US inflation data. However, Indian markets are robust due to the festival season.”
Analysts also said that strong macro-economic recovery in India has boosted confidence about equities. September retail inflation dropped further to 4.3% (from 5.3%) while August IIP expanded 11.9% year-on-year which is a moderate acceleration from 11.5% YoY in July.
“Going ahead, while the festive season and unlocking gains may support demand in the near term; exports outlook remains key to outlook. Accordingly, softening global growth momentum and lingering supply bottlenecks could be a dampener in the short run,” said Edelweiss Securities.
Analysts at Edelweiss Securities expect the Reserve Bank of India to continue to maintain an accommodative stance to support growth, especially when the fiscal impulse is fading and economic recovery is still uneven. “An attempt by the RBI to contain any supply-led rise in inflation will prove unfruitful and instead start weighing on economic growth,” it said.
Even as Indian markets are on the rise, foreign Institutional investors (FIIs) inflows into equities have slowed down to $100.6 million in October from $1.13 billion in previous month. Domestic institutional investors including mutual funds and insurance companies have pumped in ₹2471.69 crore so far in the month from ₹7236.72 crore in September.
According to analysts at Credit Suisse Wealth Management, India cost pressures due to higher commodity prices and rising shipping/freight costs are likely to be visible in corporate earnings in the next couple of quarters. They continue to remain neutral on equities and prefer focusing on companies that are less susceptible to rising input cost pressures and are going to benefit from the re-opening of the economy.
“In the near term too, as the inflation pressure rises, the shift to equities from bonds may support buying interest in equities, albeit in select sectors that thrive in an inflationary environment or are less susceptible to input cost pressures and supply chain disruptions,” Jitendra Gohil and Premal Kamdar, analysts, Credit Suisse Wealth Management, India said.
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