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 Bank Nifty index futures—at 147,443 contracts as of 13 November compared to 62,030 contracts long on 15 September when the market hit a record high of 20,222.45—which reflects their bearish bets.
The rally on Wednesday in the benchmarks was aided by the covering of these shorts, according to Rohit Srivastava, founder of IndiaCharts.
When FPIs begin short covering, they have to buy back the contracts they sold earlier to close them out, fuelling a rise in stocks. Wednesday’s data on the open interest was not available till press time. On Wednesday, FPIs bought shares worth ₹550.19 crore and local institutions ₹609.82 crore. Investor wealth rose by ₹3.33 trillion.
In percentage terms, the Nifty gained the most since 31 March when it rose 1.6%, while the Sensex’s rise was the most since 30 June when it gained 1.26%. The Nifty SmallCap 250 surged to a record high of 12,894.85 on retail buying, analysts said. The NSE advance decline ratio stood at 3:2. The rupee gained 19 paise to close at 83.14 while the 10-year benchmark government bond yield dipped 6 basis points to 7.22%.
The Nifty’s gains were led by tech stocks such as LTI Mindtree and Tech Mahindra, which gained 2.7-3.75%, and auto scrips like Tata Motors and Eicher Motors which gained 2.8%-5.6%.
Tata Motors rose on news of its inclusion in the MSCI EM index effective from the month end, which could see it attract inflows of $184 million.
The losers included Bajaj Finance, IndusInd Bank and PowerGrid which declined by 1-1.8%. Bajaj Finance fell amid reports of the RBI directing it to stop sanctions and disbursal of loans under two lending products with immediate effect. A short build-up was seen on its derivatives counter, which fell by 2.63%.
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Updated: 16 Nov 2023, 12:16 AM IST
