Why Sensex is up 1,000 points today? Record high in sight

Market


Indian stock markets surged today, alongside Asian peers, after a bumper session on Wall Street as lower US inflation dimmed expectations of more aggressive Federal Reserve rate hikes. Data released on Thursday showed that the US consumer price index (CPI) was a lower-than-expected 7.7% in October, down from 8.2% in September. The US dollar slumped against rival currencies while US bond yields also fell sharply as investors cheered the prospect of less hawkish moves by the central bank.

Indian stock market benchmark Sensex rose over 1,000 points to 52-week high of 61,689 while the broader Nifty was above 18,300. The rupee also strengthened to 80.74 against the US dollar, as compared to previous close of 81.81, according to Bloomberg data. Overnight, the US dollar index slumped more than 2% overnight to 108.1, the most in over a decade.

In October last year, Sensex had hit a record high of 62,245.

“We expect the dollar index to remain weak and could test 105.00 levels in the short term. On the other hand, the rupee slipped against the U.S. dollar after profit taking in the domestic equity markets. However, weakness in the global energy prices and corrections in the dollar index supported the rupee at lower levels, Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

IT stocks led the gains with Wipro, Infosys and HCL Tech up nearly 4%.

Analysts see a new high for Indian markets soon. “It was well known that the crucial US inflation numbers for October will sway the market either up or down depending on the trajectory of inflation. Now that the inflation print – both CPI and core- has come below expectations, the direction of the markets is a foregone conclusion. The numbers speak for themselves – Nasdaq is up by 7.35%, S&P is up by 5.5%, the dollar index has crashed to 108.3 and the US 10-year yield has dived to 3.8%. Since the CPI and core print indicate moderation of inflation, it is probable that the Fed might pause after one more hike of 50 bp. This is good news for global equity markets,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“Since dollar is weakening, FIIs are likely to increase their buying and with Monthly SIP figure crossing Rs13000 crores, DIIs too will have to deploy the inflows. In brief, it is Advantage Bulls for the near- term. New record for the Nifty is only a question of when,” he added.

“Indian economy and markets have shown remarkable resilience and “de-coupling” in this global uncertainty. Indian economy continues to do well and is expected to grow 6.5% to 7% for the next two years. Corporate profitability also is trending well, and earnings are expected to grow in mid-teens for the next two years. Domestic demand is trending up well, with the onset of the festive and wedding season and should provide an additional tailwind for consumer and economy facing companies. Global markets and scenario also seem to be stabilising,” said Rahul Veera, smallcase manager & Fund manager – RIA at Abakkus Asset Manager LLP.

But volatility should be expected regularly as the world still is grappling with multiple macro-economic issues as well as geo-political concerns, he added.

The Sensex’s gain of almost 6% this year has put it on course for a seventh straight annual advance. Foreign investors have bought a net $2.5 billion of Indian shares so far this quarter, paring outflows for 2022 to about $20 billion.

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