Sensex’s 1,100-point rally on Friday was largely led by a lesser-than-expected US CPI inflation print, which raised hopes of end to the Fed’s aggressive rate hike cycles. A strengthening dollar, which is weighing on emerging market currencies of late, took a U-turn, sending Asian markets higher.
US core CPI inflation moderated noticeably to 0.272 per cent month-on-month in October from 0.576 per cent in September, falling short of the market consensus. Overall, US CPI inflation fell to 6.284 per cent YoY in October from 6.631 per cent a month ago.
Investors now believe that Fed might moderate the pace of rate hikes in the coming months as inflation seems to have peaked.
“Healthcare insurance prices dropped sharply by 4 per cent m-o-m due to an annual update, weighing down core CPI inflation. Core goods inflation also decelerated noticeably, led by a 2.4 per cent decline in used vehicle prices. On the service side, regular rent and OER inflation decelerated a little more than we had expected. However, the moderation in rent-related components appeared to reflect negative payback from strong increases in small cities in the West,” Nomura said.
The foreign brokerage said it does not think slower-than-expected October rent inflation is the beginning of a downward trend. But the market was happy for now.
At 12.27 pm, the BSE Sensex was trading at 61,740.28, up 1,126.58 or 1.86 per cent. The Nifty50 was trading at 18,342.40, up 314.20 points or 1.74 per cent.
US CPI data
This inflation report was a nice surprise, said Edward Moya, Senior Market Analyst, The Americas OANDA
Inflation has been very slow to come down, but the report gives us hope that this deceleration with pricing pressures might bring back hopes of a soft landing, he said.
Wall Street stocks rally
Following CPI print, US stocks surged, the dollar fell while the US Treasury yields tanked overnight . Dow Jones advanced 1,201.43 points, or 3.7 per cent, to 33,715.37. S&P500 added 207.8 points, or 5.54 per cent, to 3,956.37. Nasdaq Composite rose 760.97 points, or 7.35 per cent, to 11,114.15.
Asian market mirror gains
Asian shares rallied on Friday morning, tracking the overnight rise in US stocks. Hong Kong’s Hang Seng soared 7.24 per cent, followed by Taiwan’s TWSE index (up 3.73 per cent), Korea’s Kospi (3.37 per cent), Japan’s Nikkei (up 2.98 per cent), and China’s Shanghai Composite (up 1.69 per cent).
Weak dollar
Dollar index, which tracks the movement of greenback with six major world currencies, fell 0.3 per cent to 107.90 level.
“Since dollar is weakening, FPIs are likely to increase their buying and with Monthly SIP figure already crossing Rs 13,000 crore and DIIs too will have to deploy the inflows,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
In brief, “it’s advantage before the near- term. New record for the Nifty is only a question of when,” he said.
NSDL data showed FPIs have bought shares worth Rs 19,367 crore in November so far. They have sold equities worth Rs 1,49,430 crore so far this year.
Technical set up
Pravesh Gour, Senior Technical Analyst, Swastika Investmart said if Nifty manages to sustain above the 18,350 level, one can expect a move towards 18,500-18600 levels.
“On the downside, 18,200-18,150 will be an immediate demand zone after a gap-up opening. The overall structure of both Nifty and Sensex is bullish. Investor could invest in the market to ride on the likely 19,000-plus levels in the near term,” he said.
Also Read: Nykaa shares zoom 20% intraday; here’s the new target price