Rate-cut expectations lift benchmark equity indices to near peak levels

Renewed expectations of December rate cuts by the Fed and RBI lifted sentiment, sending the Nifty near a record close and giving indices their strongest single-day rise in five months.

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The benchmark equity indices staged their strongest single-session rally in five months on Wednesday, powered by a resurgence in expectations that both US Federal Reserve and Reserve Bank of India (RBI) could cut interest rates as early as next month. 

The Sensex climbed 1,023 points, or 1.21 per cent, to 85,610, while the Nifty 50 surged 321 points, or 1.2 per cent, to 26,205 — just 11 points shy of its all-time closing peak. The Sensex now sits barely 0.3 per cent off its own record high. 

Fresh US economic data this week showed retail sales inched higher in September; private payrolls signalled cooler labour-market momentum. Softer macro prints, coupled with rising speculation that Kevin Hassett, director of the White House National Economic Council, is in the running for the Fed chair, have strengthened expectations of an imminent rate cut there.

RBI Governor Sanjay Malhotra’s recent comment that there was “certainly room” to further cut the repo rate has also fuelled the rally in rate-sensitive sectors. 

Indian equities have been moving upwards since October, underpinned by better-than-expected September-quarter earnings and revived hopes of a trade deal with the US. A rotation out of artificial-intelligence stocks and growing bets on a global easing cycle have bolstered sentiment in November. Still, stretched valuations and continued uncertainty around a trade deal 

with the US have sparked bouts of profit-taking.   

Market breadth has also thinned, with heavyweight stocks doing much of the heavy lifting.

 

“Market sentiment improved with rising expectations of a US Federal Reserve rate cut in December, alongside softer US yields and a weaker dollar. The decline in crude oil prices eased inflation concerns. On the domestic front, the RBI is widely expected to deliver a 25-basis-point rate cut in December, supported by moderating inflation and a dovish stance. Meanwhile, growing optimism around a potential Russia-Ukraine truce is lifting risk appetite and improving the outlook for next year,” said Vinod Nair, head of research at Geojit Financial Services.

 

Foreign portfolio investors poured in ₹4,778 crore, their biggest single-day net purchase since October 28, while domestic institutions added ₹6,248 crore, the most since November 14.

 

Market breadth was robust on Wednesday, with 2,721 stocking gaining and 1,453 declining.

 

Even as the Nifty 50 inches towards uncharted territory, the index, in the past, has run into stiff resistance near current levels.

 

“From a technical perspective, the 26,270-26,300 zone is likely to act as a key resistance area for the Nifty 50. A sustained move above 26,300 could trigger a fresh leg of the rally, taking the index towards 26,500, followed by 26,700. On the downside, support has shifted higher to the 26,050-26,000 zone,” said Sudeep Shah, head-technical and derivatives research, SBI Securities.

 

HDFC Bank, up 1.4 per cent, and Reliance Industries, up 2 per cent, were the largest contributors to the Sensex’s gains.

 

Reliance Industries’ market valuation hit a record ₹21 trillion. The shares of the market heavyweight went up by 1.99 per cent to settle at ₹1,569.75 apiece on the BSE.