Nifty reclaims 20,000, primed for biggest monthly gain since July 2022

Extended drop in US bond yields and dollar fuels optimism of earlier-than-expected interest rate decline

Benchmark indices rallied over 1 per cent on Wednesday amid continued optimism that the US Federal Reserve (Fed) is done raising rates. A further retreat in US bond yields and the dollar also stoked optimism that interest rates may start to fall sooner than expected.

The National Stock Exchange Nifty rose by 207 points, or 1.04 per cent, to close at 20,097, while the S&P BSE Sensex rose by 723 points, or 1.1 per cent, to finish at 66,902.

The Nifty closed above the 20,000 mark for the first time since September 18. With the latest gains, the Nifty has extended its month-to-date advance to 5.33 per cent and looks set to post its biggest monthly gain since July 2022 when it had rallied by 8.7 per cent. The Nifty is less than 96 points shy of a new record closing high, having logged an all-time closing high of 20,192 on September 15.

“The drop in the US 10-year bond yield to below 4.3 per cent and the dollar index dropping below 103 are positive for equity markets. Also, foreign portfolio investors (FPIs) have turned buyers in response to the changed reality,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.

After climbing to 5 per cent in October, 10-year US Treasury yields have cooled off this month following a drop in US consumer inflation and dovish signals from US Federal Reserve officials.

On Tuesday, Federal Reserve Governor Christopher Waller said he was growing more confident that the policy was in place now to bring inflation under control. He also mentioned that the US central bank may start cutting rates if inflation continues to ease over the next three to five months.

Amid cooling US bond yields, FPI flows have turned positive. In November so far, they have invested a net of Rs 5,192 crore after pulling out Rs 24,548 crore in October and Rs 14,767 crore in September.

Provisional data from exchanges peg the net investments by foreign institutional investors on Wednesday at Rs 72 crore. Domestic institutional investors bought stocks worth Rs 2,361 crore in the previous session, the highest single-day buying in November.

Foreign flows could get a boost as the rebalancing of the Morgan Stanley Capital International (MSCI) Emerging Markets Index becomes effective on Thursday. India is expected to receive $1.5 billion in passive flows as nine new stocks get added to the MSCI EM Index. Some of them include IndusInd Bank, Suzlon Energy, and Paytm.

However, there could also be some volatility on Thursday ahead of exit poll results for state elections due later in the evening.

“Markets could witness some nervousness on November 30, being derivatives expiry day and ahead of exit polls results in the evening,” said Deepak Jasani, head of retail research, HDFC Securities.

On Wednesday, 40 of the 50 Nifty components ended with gains, while 26 of the 30 Sensex shares advanced.

Axis Bank was the top gainer in both Nifty and Sensex, gaining 3.9 per cent, followed by Mahindra & Mahindra (up 3.4 per cent), Wipro (up 2.4 per cent), and Tata Motors (up 2.1 per cent).

The broader market index Nifty 500 rose by 0.9 per cent, the Nifty Midcap 100 gained 0.8 per cent, and the Nifty Smallcap 100 rose by about 1 per cent.