Sensex, Nifty Join Global Stocks Rally On Cooling US Inflation Prospects

Sensex, Nifty Join Global Stocks Rally On Cooling US Inflation Prospects

Stock Market India: Equities rallied after signs of sharply decelerating US inflation

Equity benchmarks started strong on Thursday, joining a broad global stocks rally after US inflation data became less hot than previously feared and prompted bets of less aggressive rate hikes from the Federal Reserve.

The 30-share BSE index was up 562.63 points, or 0.96 per cent, at 59,379.92 and the the broader NSE Nifty gained 147.05 points, or 0.84 per cent, to 17,681.80.

On Wednesday, the market was range-bound for the most part of the session as investors kept their exposure low due to weak global cues and ahead of the US inflation report.

In contrast to June, when inflation increased monthly by 1.3 per cent, consumer prices in the US were constant in July. Due to a steep decline in the price of fuel, the July result fell short of forecasts, which led markets to reposition themselves in the belief that inflation had peaked.

Investors anticipate that if price increases have peaked, the US Fed won’t need to continue raising interest rates at such an excruciatingly rapid clip.

Wall Street equities rallied as traders priced in a 50 basis points Fed rate hike next month, compared with the 75 bps increase that had been expected before inflation report.

Both the S&P 500 futures and Nasdaq futures rose more than 0.3 per cent on Wednesday. The S&P 500 rose more than 2 per cent during the previous session while the Nasdaq Composite closed 20 per cent above its recent closing low in June.

The pan-European STOXX 600 index closed up 0.89 per cent and MSCI’s gauge of stocks across the globe gained 1.80 per cent.

That sentiment extended into early Asia trade on Thursday.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.0 per cent, driven by a 1.2 per cent jump in resources-heavy Australia, a 1.4 per cent gain in South Korea and a 1.2 per cent advance in Hong Kong.

Gains in Chinese shares were more subdued. Blue chips rose just 0.5 per cent as new COVID-19 lockdowns in more Chinese cities, including the eastern export hub of Yiwu, dented sentiment.

“Rising real yields, due to the Fed’s commitment to fighting inflation, have been an enormous problem for valuations in 2022, so any dovishness is seen as positive by the stock market, particularly for the highest valued companies,” Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors, told Reuters.

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