Sensex Rises Over 80 Points After Cooling Inflation Report

Stock Market India: Nifty, Sensex open in the green

Indian equity benchmarks rose in early trade on Tuesday, reversing previous session’s modest losses after domestic retail inflation declined to levels below the central bank’s tolerance level in November, driving expectations for a slower pace of interest rate rises.

The BSE Sensex index rose 84.94 points to 62,215.51 in early trade, and the broader NSE Nifty opened slightly higher, reflecting a sea of green in other Asian indexes.

The winners from the Sensex pack were IndusInd Bank, Mahindra & Mahindra, Axis Bank, Bajaj Finance, UltraTech Cement, Nestle, HDFC Bank, and HDFC.

Among the laggards were Asian Paints, Bharti Airtel, Hindustan Unilever, Kotak Mahindra Bank, and Tata Steel.

“Markets are expected to gain strength in early trades Tuesday after overnight gains in the US markets and sentiment booster inflation data that eased to 11-month low would keep investors’ spirits high,” said Prashanth Tapse, Senior Vice President for Research at Mehta Equities.

“Technically, Nifty’s make-or-break support for the day is at yesterday’s low at 18,345 mark. We suspect the trading bias could tilt in favour of the bulls as long as Nifty holds above the 18,345 mark. However, the market will watch for the US Fed meeting outcome to unfold as the policy decision on interest rates would determine the trend in the rest of the world in the near term,” he added.

On Monday, data showed domestic retail inflation fell to an 11-month low of 5.88 per cent in November, below the upper end of RBI’s target band of 2-6 per cent for the first time since December 2021.

That shored up views that the RBI would slow the pace of future rate hikes and comes ahead of key US inflation data later in the dat and the Federal Reserve’s final meeting for the year on Wednesday.

However, the spike in crude prices, which was supported by US supply concerns and hopes of a demand boost from China, could limit gains in the domestic equity market. For nations like India, which imports the majority of its crude, the increase in oil prices is detrimental.

Foreign institutional investors (FIIs) extended their selling spree for the sixth session in a row on Monday, the longest in seven weeks and could weigh on Indian stocks if the trend continues in today’s session.

Still, the overnight confidence on Wall Street that the US Fed and other central banks will slow future rate hikes supported Asian stock markets on Tuesday.

This week, the Fed, European Central Bank and the Bank of England were expected to hike rates by 50 basis points (bps), rather than the aggressive 75 bps previously.

“Given the very close proximity (of US CPI data) to the Fed meeting, it clearly has the ability to change the tone of the message…but is highly unlikely to change the headline 50 bps hike,” Deutsche Bank said in a research note.