Sensex, Nifty rally for third straight session: Factors propelling the markets higher

The market has posted some handsome gains in the early session on October 18 on the back of strong global cues. The Sensex is up 683.11 points or 1.17 percent at 59,094.09, and the Nifty jumped 199.90 points or 1.15 percent at 17,511.70 by the first hour of trading.

Both the Sensex and the Nifty stayed in the green for the second straight session today.

Among the sectors, auto, capital goods, FMCG, IT and power indices added a percent each, while the midcap and smallcap indices added half a percent each.

Let’s take a look at the factors propelling the markets higher.

UK makes U-turn on energy support scheme

British Finance Minister Jeremy Hunt reversed Prime Minister Liz Truss’s economic plan announced three weeks ago that slammed the UK markets and dented investor sentiment. Under the new policy, most of Truss’s £45 billion of unfunded tax cuts will go and a two-year energy support scheme for households and businesses – expected to cost well over £100 billion – will now be curtailed in April.

The measures come two weeks ahead of schedule as Hunt seeks to calm investors spooked by the Truss government’s plans that raised concerns about how the tax cuts might be funded and sent borrowing costs sharply higher, prompting the Bank of England to intervene in the gilts market.

UK PM Liz Truss says sorry’ for mistakes, policy U-turns

US markets rally

US stocks kicked off the trading week on Monday with a rally after Britain reversed course on an economic plan, while Bank of America was the latest financial company to post solid quarterly results, which lifted optimism about the corporate earnings season. The Dow Jones Industrial Average rose 550.99 points, or 1.86 percent, to 30,185.82, the S&P 500 gained 94.88 points, or 2.65 percent, to 3,677.95 and the Nasdaq Composite added 354.41 points, or 3.43 percent, to 10,675.80.

Bank of America Corp shares surged 6.06 percent as the lender’s net interest income was buoyed by rising interest rates in the quarter, even though it added $378 million to its loan-loss reserves to buttress against a softening economy.

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Asian markets edge higher

Asia stocks nudged higher on Tuesday as the dramatic U-turn in British fiscal policy brightened investor sentiment, while the US dollar took a breather at its lowest levels in more than a week as a revival in risk-taking lowered its appeal. Among the Asian names, Nikkei and Hang Seng added over a percent each while Kospi and Taiwan were up close to 1 percent each. SGX Nifty at 09:44 AM was trading at 17,476.50, up 161 points or 0.93 percent.

Dollar takes a breather

The dollar index plunged 1 percent on Monday to just above the 112 level. The gauge’s slide came alongside a 2.7 percent rally in US equities, with the fall in UK yields boosting demand for risk assets. The dollar dipped against a basket of major currencies and sterling jumped on Monday after Britain’s new finance minister ditched most of the government’s “mini-budget”, while better than expected earnings from Bank of America helped to boost risk appetite.

The rupee appreciated 22 paise to 82.08 against the US dollar in early trade on Tuesday, tracking positive domestic equities and an overnight fall in the dollar index.

At the interbank foreign exchange, the domestic unit opened at 82.21 against the dollar, then gained further ground to touch 82.08, a gain of 22 paise over its previous close

Investors are also focused on whether the Bank of Japan would intervene as the Japanese currency falls to its weakest level against the dollar in 32 years. Sterling was last up 1.54 percent at $1.1348, after earlier reaching $1.1440, the highest since October 5.

Chances of Nifty scaling 20,000 higher than falling to 15,000, says Shrikant Chouhan of Kotak Securities

India retail inflation set to ease from September highs – RBI

Retail inflation is set to ease from September levels, while economic activity is poised to expand, the Reserve Bank of India said in its monthly bulletin published on Monday.

“Headline inflation is set to ease from its September high, albeit stubbornly,” the RBI wrote in an article titled “State of the Economy”, adding the fight against inflation will be “dogged and prolonged”, given the long and variable lags with which monetary policy operates.

It said the expected easing in inflation would likely be “driven by the food and beverages, which has undergone repeated shocks in the first half of the year.” India’s retail inflation accelerated in September to a five-month high of 7.41 percent from a year earlier as food prices surged.

Technical View

Deepak Jasani, Head of Retail Research, HDFC Securities

All three major US stock indexes finished higher on Monday, giving the Nasdaq Composite its biggest one-day percentage gain since July, as investors awaited a deluge of corporate earnings and after a U-turn on tax policy by the U.K. government helped soothe global bond markets. Financial-market sentiment improved on Monday as the result of better-than-expected earnings from Bank of America Corp, as well as developments in the U.K. under new finance minister Jeremy Hunt.

Nifty filled the upgap made on the previous day due to the weakness in early morning but closed much higher. It continues to show mild strength and the next resistance could come in at 17497-17532 band while support could come in at 17142-17170 band.

(Agency inputs)

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