Benchmark indices gain over 1% as supportive macros trigger a market rally

The stock market surged over a percent today on the back of strong global cues. At 09:46am, the benchmark Sensex was up 956.34 points or 1.58 percent at 61570.04, and the Nifty jumped 268.60 points or 1.49 percent at 18296.80.

All sectoral indices were trading in the green led by IT, metals and realty, which added 1-3 percent each. The mid-cap and small-cap indices were up half-a-percent each.

“It was well known that the crucial US inflation numbers for October will sway the market either up or down, depending on the trajectory of inflation. Now that the inflation print – both the consumer price and core – has come below anticipation, the rally in the markets has been a foregone conclusion. Since the CPI and core print indicate moderation of inflation, it is probable that the Fed might pause after one more hike of 50 basis points. This is good news for global equity markets,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“Since the dollar is weakening, FIIs are likely to increase their buying and with monthly SIP figure crossing Rs 13,000 crore, DIIs too will have to deploy the inflows. In brief, it is advantage bulls for the near- term. New record for the Nifty is only a question of when,” he said.

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There are a host of factors that orchestrated the rally in the market on November 11. Let’s take a look at the major drivers.

US inflation rises less than expected to 7.7% in October

Price increases moderated in the United States last month in the latest sign that the inflation pressures that had gripped the nation might be easing as the economy slows and consumers turn more cautious.

Consumer inflation reached 7.7 percent in October from a year earlier and 0.4 percent from September, the Labor Department said on Thursday. The year-over-year gain was the smallest since January. Excluding volatile food and energy prices, core inflation rose 6.3 percent in the past 12 months and 0.3 percent from September.

The numbers were lower than what economists had anticipated.

Strong global cues

The S&P 500 and Nasdaq jumped on Thursday, racking up their biggest daily percentage gains in over 2-1/2 years as a sign of slowing inflation in October sparked speculation the Federal Reserve might become less aggressive with interest rate hikes.

The S&P 500 climbed 5.54 percent to end the session at 3,956.31 points. The Nasdaq gained 7.35 percent to 11,114.15 points, while Dow Jones Industrial Average rose 3.70 percent to 33,715.37 points. All 11 S&P 500 sector idices rallied, led by information technology, up 8.33 percent, followed by a 7.74 percent gain in real estate.

In Asia, Hang Seng zoomed over 5 percent, followed by Kospi, Nikkei and Shanghai, which rose 1-3 percent each. The SGX Nifty was trading at 18,398, up 301 points or 1.66 percent, at 09:51 am.

Dollar goes downhill 

The dollar languished on Friday after the US inflation data came in cooler than expected, raising hopes that inflation may have peaked and that the Federal Reserve will begin scaling back its hefty interest rate hikes. The dollar tumbled overnight after the release, and recorded its worst day against the Japanese yen since 2016, having fallen 3.7 percent.

It has since clawed back some of those losses and gained 0.53 percent last to 141.69 yen. Against a basket of currencies, the US dollar index slumped more than 2 percent overnight, the most in over a decade, to stand at 108.06.

Rupee scales seven-week high

Rupee surged 110 paise from its previous close, its biggest opening gain in nine years to 80.71 against the US dollar on Friday as the greenback slipped against a basket of six peers following the US inflation data. Global crude oil benchmarks, however, extended gains on Friday.

(With agency inputs)

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