India’s stock market reacted positively to slowing inflation numbers with Sensex and Nifty jumping up by 600 points and 200 points, respectively, on Wednesday morning.
India’s retail inflation, as measured by the Consumer Price Index (CPI), declined to a four-month low of 4.87% in October, compared to 5.02% in September 2023, due to cooling prices of food items.
Global cues also added to the bullish sentiments. While geopolitical risks persist due to the Israel-Hamas war, it has so far had limited impact on the market movement. Wall Street rallied this week after an unexpected inflation slowdown bolstered bets that the Federal Reserve’s aggressive hiking cycle is now over
Major gainers on the NSE at 9.30 am: Hindalco (4.72%); LTIMindtree (3.17%); Tech Mahindra (2.60%); Tata Steel (2.19%); JSW Steel (2%)
Major losers: Power Grid (-0.14%); Britannia (-0.07%); Sun Pharma (-0.04%)
Indian government bond yields declined in the early session on Wednesday, with the benchmark bond yield falling to nearly a six-week low. The 10-year benchmark bond yield was at 7.2313% as of 10 am after ending the previous session at 7.2828%. Earlier in the day, the yield fell to 7.2262%, the lowest since October 6.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “The October US inflation data is a game changer for the stock market. The 3.2% October inflation print is lower than expected. More importantly, the mere 0.2% month-on-month increase in core inflation is hugely positive. The takeaway from these numbers is that the Fed is done with rate hikes and the timeline for rate cuts in 2024 is likely to be advanced. The sharp recovery in US markets will be reflected in India, too. Short covering can add to the rally.”
“FIIs are likely to turn buyers, lest they miss out on the rally in the best performing large economy in the world. Leading financials that were weighed down by FII selling will bounce back. Decline in CPI inflation in India is also a favourable factor. Across sectors, a rally is likely. Financials, automobiles, real estate, cement and platform digital companies will attract investment from DIIs, HNIs and retail investors. The tug-of-war between FIIs and DIIs is clearly in favour of DIIs,” he added.