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Markets on Fire: Sensex Soars Over 742 Points on Global Optimism and Benign Inflation - India's Investment Landscape Shines after the US Dollar Melts Down!

In a remarkable turn of events, the Sensex experienced an unprecedented leap of more than 742 points on Wednesday, propelled by a worldwide market upswing. This surge followed the release of data indicating that US inflation in October had cooled to a lower-than-expected 3.2 percent. The optimistic response to this benign inflation figure fueled hopes that the US Federal Reserve might consider a pause on interest rates, and potentially even a reduction in lending rates come 2024.

The 30-share Sensex, serving as a key indicator of market sentiment, surged by 1.14 percent or 742.06 points, settling impressively at 65,675.93. Earlier in the day, it had reached a peak of 65,747.65. Simultaneously, the NSE’s Nifty 50 gained 231.90 points, a 1.19 percent increase, to conclude the day at 19,675.45.

This widespread market rally extended to the broader spectrum, with the BSE Smallcap Index witnessing a 1.13 percent jump, and the Midcap Index advancing by 0.91 percent. As a result, investors saw their wealth grow significantly, with a staggering increase of Rs 3.29 lakh crore.

Adding to the positive global economic landscape, the UK reported a significant drop in inflation to 4.6 percent in October, down from the previous month’s 6.7 percent and below economists’ predictions of 4.8 percent. Furthermore, in India, retail inflation plummeted to a five-month low of 4.87 percent in October, contributing to the buoyant market atmosphere.

Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, remarked, “Domestic equities surged higher, fuelled by the moderation in inflation in India and the US.” The global rally gained momentum after weak US inflation data raised hopes that the interest rate-hiking cycle had peaked. Additionally, positive developments such as fresh stimulus in China and a substantial decline in the UK’s inflation further boosted market sentiments.

Market experts anticipate this positive trend to persist, driven by encouraging domestic data, as well as the moderation of US bond yields and the dollar index. Vinod Nair, Head of Research at Geojit Financial Services, noted, “The market’s strong gap-up opening in response to positive global cues on account of the softening inflation data in the US and the UK fuelled optimism that the interest rate cycle was drawing to an end.”

Amidst this favorable scenario, MSCI has added nine Indian stocks to its Global Standard Index in its recent review. This development is expected to lead to an estimated net inflow of $1.5 billion from foreign portfolio investors (FPIs). Notably, the nine selected stocks include IndusInd Bank, Suzlon Energy, Tata Motors DVR, Persistent Systems, APL Apollo Tubes, Poly-cab India, Macrotech Developers, One97 Communications (the parent of Paytm), and Tata Communications.

According to Nuvama Alternative and Quantitative Research, this reshuffling is a significant uptick over the past three years, nearly doubling the country’s weight. The report adds that India’s weightage in MSCI’s Global Standard (Emerging Markets) Index is expected to reach an all-time high of 16.3 percent, up from the current 15.9 percent.

As FPIs commonly use the MSCI index for fund allocation, it is anticipated that the inclusion of these stocks will attract substantial investments. IndusInd Bank, for instance, is estimated to receive a net inflow of $355 million, while Suzlon Energy, Persistent Systems, and APL Apollo Tubes are expected to see inflows of $289 million, $255 million, and $228 million, respectively. The inclusion of Tata Motors DVR is also anticipated to attract inflows of $184 million.

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