Sensex, Nifty Set To Rally As US Inflation Cools

Indian shares look set to open sharply higher on Wednesday as new data showed U.S. inflation is on a firm downward trajectory, boosting bets the Federal Reserve will forgo any more interest rate hikes and indeed start cutting rates by May.

Indian stock markets were closed on Tuesday for Diwali Balipratipada.

Benchmark indexes Sensex and Nifty fell around half a percent each on Monday, tracking mixed global cues and un uptick in U.S. Treasury yields. The rupee ended 4 paise lower at 83.32 against the dollar.

India’s consumer price inflation eased less-than-expected in October to the lowest level in four months but remained within the RBI’s tolerance band of 2-6 percent for the second straight month, data from the National Statistical Office showed on Monday.

The consumer price index climbed 4.87 percent year-over-year in October, slower than the 5.02 percent rise in September. Economists had forecast the inflation rate to moderate to 4.80 percent.

Separate data released on Tuesday showed India’s wholesale prices declined for the seventh straight month in October, and at a faster-than-expected rate.

The wholesale price index dropped 0.52 percent year-over-year in October, after a 0.26 percent decline in September. Economists had expected a 0.20 percent fall.

Goldman Sachs has upgraded the Indian stock market to the ‘overweight’ category, citing the country’s strong economic growth prospects.

Activity in India’s manufacturing sector accelerated in the second quarter of 2023-24 and is likely to continue for the subsequent quarters of the financial year 2023-24 as well, according to industry body FICCI’s latest survey.

Asian markets followed Wall Street higher this morning and gold edged up, while the dollar and Treasury yields steadied after declining in the previous session. Oil inched up slightly after settling on a flat note Tuesday.

China today reported better-than-expected retail sales and industrial data for October while the readings on fixed asset investment and investment into real estate investment disappointed.

U.S. stocks rallied overnight to build on their strong November gains as tamer than expected inflation data bolstered the view that the Fed was probably done with rate hikes.

The 10-year Treasury yield tumbled below 4.5 percent after data showed the annual rate of consumer price growth slowed to 3.2 percent in October from 3.7 percent in September. Economists had expected the pace of growth to decelerate to 3.3 percent.

Core consumer prices were up by 4.0 percent year-on-year, reflecting the smallest year-over-year increase since September 2021.

The tech-heavy Nasdaq Composite soared 2.4 percent to hit over three-month high while the Dow and the S&P 500 climbed 1.4 percent and 1.9 percent, respectively to set new two-month closing highs.

European stocks also closed on a buoyant note on Tuesday as U.S. inflation showed signs of slowing.

The pan European STOXX 600 advanced 1.3 percent after the release of Eurozone GDP, employment and German investor sentiment data.

The German DAX rallied 1.8 percent and France’s CAC 40 surged 1.4 percent while the U.K.’s FTSE 100 edged up 0.2 percent.