Sensex up for a ninth day, Nifty closes 20,000 for the first time

Market analysts remain cautious as US inflation data surpasses expectations, raising concerns about the Fed's future actions

The benchmark National Stock Exchange Nifty closed above the 20,000 mark for the first time on Wednesday, while the S&P BSE Sensex’s winning run entered its ninth day, matching the longest gaining streak seen in April. Gains in top index weights and positive macroeconomic data helped domestic markets charge ahead, even as global peers experienced losses.

The Nifty ended the session at 20,070, up 77 points or 0.4 per cent. The Sensex finished the session at 67,467, gaining 246 points or 0.4 per cent. The Sensex, which has rallied 2,706 points, or 4 per cent in the past nine trading sessions, is now just 82 points away from a new high. If the Sensex continues to gain for another day, it will mark its longest winning streak since January 2021 when it rose for 10 days on a trot.

However, experts are not ruling out a market fall on Thursday, as US inflation data, released after market hours, exceeded expectations, raising concerns about the US Federal Reserve’s next move.

Back home, investor sentiment was boosted by retail inflation and industrial output data released after Tuesday’s market hours. Retail inflation moderated to 6.83 per cent in August after reaching a 15-month high in July, primarily due to easing vegetable prices. There was also some moderation in prices of clothing and footwear, housing, and miscellaneous items.

Similarly, India’s factory output rose to a five-month high of 5.7 per cent in July, up from 3.7 per cent in June, driven by growth in mining and power.

“Overall, sentiment improved following the release of domestic retail inflation, which fell to a two-month low, while July Index of Industrial Production growth surged to a five-month high. We suggest investors shift their focus from small and midcaps to largecaps in the near term, as the risk-reward ratio is favourable there,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

The broader market recovered after Tuesday’s profit booking, with the Nifty Smallcap 100 and the Nifty Midcap 100 rising by 1.2 per cent and 0.2 per cent, respectively.

A day earlier, they had posted their worst single-day fall since December, amid concerns that valuations may have overheated following a sharp 40 per cent increase from this year’s lows in March. The Sensex and the Nifty have gained 18 per cent from their 2023 lows.

Unlike in some of the past few years, this year’s rally has been broad-based, with most sectors participating.

“At this juncture, we believe it will be prudent for investors to take some risk off the table and shift from higher beta stocks to largecaps and defensives. Amongst the small and midcap universe, we recommend that investors stick to companies with a proven track record of generating wealth for investors through prudent capital allocation and efficient business operations,” said Pranav Haridasan, managing director and chief executive officer, Axis Securities.

On Wednesday, the market breadth was strong, with 2,144 advances and 1,514 declines. Two-thirds of Sensex stocks gained. Bharati Airtel, which rose by 2.7 per cent, gained the most among Sensex stocks and contributed the most to its gains. Telecommunication stocks gained the most, and their sectoral index on the BSE rose by 2.6 per cent.