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The Indian stock market experienced a significant surge on Thursday, with the BSE Sensex and Nifty50 reaching new all-time highs fueled by a confluence of positive factors, including optimism surrounding potential rate cuts by the US Federal Reserve and a global market rally. The Sensex closed the day at 82,962.71, up 1,440 points or 1.77%, while the Nifty50 ended at 25,388.90, up 470 points or 1.89%.
The key driver behind the market rally was the release of US inflation data for August. While consumer prices rose slightly, the underlying inflation exhibited some persistence, leading to an increase in the probability of a 25-basis-point rate cut by the Fed on September 18. This shift in expectations, coupled with a weaker dollar index, made emerging market assets, including Indian equities, more attractive to foreign investors.
The decline in oil prices below $72 per barrel also contributed to the positive market sentiment. Lower oil costs ease inflationary pressures and improve corporate margins, particularly for oil-importing countries like India. The global market rally, driven by a tech-fueled surge on Wall Street and anticipation of another rate cut by the European Central Bank, also played a role in boosting Indian equities.
Foreign institutional investors (FIIs) have been consistently buying Indian equities since June, injecting nearly Rs 17,016 crore into domestic equities in September alone. This sustained inflow reflects foreign investor confidence in India's economic resilience and further bolstered market sentiment.
The possibility of a rate cut in India, given the easing of consumer price index (CPI)-based inflation in recent months, also contributed to the positive outlook for the Indian stock market. Analysts expect inflation to ease further in August, creating a conducive environment for the Monetary Policy Committee (MPC) to consider rate cuts in 2024.
The rally was broad-based, with various sectors experiencing gains. IT companies, which generate a significant portion of their revenue from the US, saw a 1% increase. Notably, Bharti Airtel shares surged nearly 5% on Thursday, reaching their 52-week high on the NSE. Other key contributors to the Sensex gain included Reliance Industries, HDFC Bank, Infosys, L&T, M&M, NTPC, ICICI Bank, and SBI.