While data showing a four-decade high inflation print in the US was worrying, a head-scratching surge in US stocks overnight, on short coverings, paved way for a rally in Asian markets on Friday morning. India was no exception.
Dancing to global tune, the BSE Sensex rallied nearly 1,100 points to comfortably trade above the 58,000 mark. NSE’s barometer Nifty50 zipped past 17,300 level.
“The uncanny ability of the market to surprise was in full flow yesterday when the S&P500 shot up by 5 per cent from the day’s lows despite the September CPI inflation numbers coming slightly higher than expectations. Such sharp rallies happen due to market positioning. The market was oversold,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Investor wealth, as suggested by the BSE market capitalisation, climbed Rs 3.37 lakh crore to Rs 273.23 lakh crore from Rs 269.85 lakh crore a day ago.
Wall Street rally
Data released overnight showed the US core inflation, which excludes food and fuel prices, came in above forecasts at 6.6 per cent, the biggest annual increase in 40 years. Yet Wall Street indices staged a smart rebound from day’s lows to end nearly 3 per cent higher. Dow Jones ended 2.83 higher, the S&P500 index climbed 2.60 per cent while the Nasdaq Composite advanced 2.23 per cent.
Edward Moya Senior Market Analyst, The Americas OANDA, said the US market reversal was a head-scratcher.
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“Despite a hot inflation report, US equities turned positive as some investors are convinced core inflation will soon start trending lower,” he said, adding that the Thursday’s rally probably got a boost from short coverings. Given the path for rates is higher, this market reversal won’t last long, he warned.
Asian markets mirror gains
Tracking the Wall Street rally, Asian markets too shrugged off concerns over inflation, for a while, and rallied in tandem with US stocks. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.6 per cent in early Asia trade, Reuters reported. Australia’s resources-heavy share index gained 1.6 per cent, South Korea advanced 2.1 per cent, while Japan’s Nikkei jumped 2.8 per cent, the report added.
Q2 earnings boost
Be it Infosys, Mindtree or HCL Tech, the reported September quarter earnings, the management commentaries and forecasts by IT firms have so far surprised the market on the upside.
That, in a quarter when Nifty as a pack is likely to report flattish year-on-year (YoY) profit in the September quarter, has boosted sentiment a bit. Net sales growth for the 50-pack index is seen at 20-23 per cent, but that is largely due to a low base.
Buying in heavyweight IT and banks
The gains, especially in Sensex, was led by IT and banking stocks. Infosys, which impressed Street with a revision in FY23 guidance and Rs 9,300 crore share buyback, alone contributed 210 points positively to Sensex’s rise. HDFC Bank and ICICI Bank added another 200 points. Mortgage lender HDFC, L&T, Kotak Mahindra Bank and Reliance Industries also contributed to the index rise.
To be sure, none of the Sensex stocks were trading in the red at the time of writing this report.
Technical view
Analysts noted that Nifty50 was volatile for the last couple of sessions and that the index was not showing any strength at highs. The immediate resistance for the index was placed at 17,150 level, which Nifty took out easily on Friday morning.
“If the market has to regain real strength, it needs to surpass 17,250 with some authority,” Sameet Chavan of Angel One had said earlier today. The index has been trading above that level so far.
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