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Powered by a much-awaited ease in US retail inflation, equity markets leapt to 52-week highs on Friday following a global market rally.
The BSE Sensex surged 1,072 points to scale a new 52-week high of 61,685 points, while the NSE Nifty jumped 304 points to 18,332 (near its 52-week high of 18,351). The two indices are now only around 1 per cent away from reclaiming their all-time highs of 62245.43 and 18,604.45, respectively.
The domestic markets have firmly regained ground in a challenging year that had been marred by stinging inflation and a fast-paced monetary tightening cycle amid a global war. The Sensex and Nifty indices are up 6 per cent so far in 2022.
“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 has come below expectations, the direction of the markets is 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 bps. The outlook is bullish for the near- term. A new record for the Nifty is only a question of when,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Here are three triggeres that led to Friday’s market rally:
US inflation report: Retail inflation in the US rose by a less-than-expected 0.4 per cent for October and 7.7 per cent from a year ago, which was its lowest annual increase since January this year. Investors turned bullish overnight following the release of the data as they expected inflation to have peaked out as this could prompt the US Fed to slow down rate hikes.
US equities jumped the most since March 2020 with the Nasdaq rallying over 7 per cent on Thursday. The Dow and S&P 500 surged 3.7 per cent and 5.5 per cent, respectively. In Asia, Hang Seng led gains, rising 6 per cent.
Foreign flows: A firm turnaround in foreign investor sentiment after a disappointing month of September is also lending strength to domestic equity markets. In October, FPIs bought shares worth nearly Rs 8,430 crore against net selling of Rs 13,405 crore in September. For the first 10 days of November too, investors have pumped Rs 8,531 crore into the cash market.
Rupee gains ground: As the US CPI cooled off in October after touching 40-year highs this year, the dollar index slumped to 108 on Thursday night. Consequently, the Rupee opened at a 7-week high of 80.71 on Friday with a 110-paise gain, the highest opening gain since September 2013.
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