Global cues lift mkts 1.2%
MUMBAI : Indian equities rallied on Wednesday tracking gains in global stocks, as lower-than-expected US inflation raised optimism about the end of the rate hike cycle. Derivative short covering by foreign portfolio investors (FPIs) also helped. The National Stock Exchange’s Nifty 50 gained 1.19% to close at 19,675.45, while the BSE’s 30-stock Sensex rose 1.14% to close at 65,675.93.
The rise in Indian markets followed a 1.14% overnight rally in the Dow Jones Index and a 2.37% increase in the tech-focused Nasdaq. The US reported retail inflation of 3.2% in October, lower than an estimated 3.3%. It was the first deceleration in four months and raised expectations that the US Federal Reserve might refrain from hiking rates further.
The dollar index, which measures the US greenback against a basket of currencies, fell to a two-month low on Tuesday while US treasury yields shed 19 basis points (bps), their biggest one-day drop since March, driving up appetite for risk assets such as equities. “Lower US interest rates are of deep interest to India and may aid the momentum as one of two negative overhangs seems to be out of the way," said Samir Arora, founder of Helios Capital. “The markets have priced in a BJP win at the hustings next year and the only other negative overhang remains the Hamas war." Arora expects the next year to be better for investors if the war doesn’t widen into a regional conflict.
He expects lower interest rates in the US to translate into lower bond yields and reverse FPI outflows from emerging markets. Though FPIs have invested ₹94,555 crore in the calendar year to date, they’ve sold ₹53,732 crore of Indian shares since September. They are also sitting on a huge short position in the Nifty and the
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