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Soft US inflation data pushes markets higher; Sensex gains 677 points

Indices post biggest gains in two weeks

FPI, Foreign portfolio investment

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Sundar Sethuraman Mumbai

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Benchmark indices rose nearly a per cent as softer-than-expected US consumer inflation renewed hopes of at least two interest rate cuts in 2024.  After swinging wildly, the Sensex ended the session at 73,664, with a gain of 677 points or 0.9 per cent, while Nifty ended the session at 22,404, with a gain of 203 points or 0.9 per cent. This was the biggest gain for both indices since April 29.

The Sensex fluctuated between 72,530 and a high of 73,750 in intra-day trade as moderating inflation data kept sentiment buoyant but sustained selling by foreign funds, and election uncertainty stoked volatility. 

The pace of foreign portfolio investor (FPI) selling, however, moderated on Thursday. They sold shares worth Rs 777 crore, while domestic institutional investors (DIIs) provided buying support of Rs 2,128 crore. So far this month, FPIs have sold shares worth nearly $3.5 billion (Rs 28,000 crore) amid a muddled outlook around US rate cuts.  Besides, experts say rotation out of India and into China due to favourable valuations also contributed to FPI selling. 


Experts believe the latest US inflation data will be supportive for emerging market stocks. 

The core consumer price index, which excludes food and energy costs, rose 0.3 per cent from March. It is the first time in three months that the US inflation reading has not breached estimates.

Investors currently expect about two rate cuts this year.

“We think this data should ease recently emerging market concerns of higher for longer rates and should therefore bring relief for Asian stocks,” said a note by Nomura.

“As soon as clarity emerges that the inflation in the US is climbing down consistently, and rate cuts are not far away, the market will seek support. And inflation is trending down decisively in the US, and that will pave the road for interest rate cuts ahead of the US elections,” said Saurabh Mukherjea, founder of Marcellus Investment Managers.

Shares of HDFC Bank rose 1.5 per cent and were the biggest contributor to Sensex and Nifty gains. Infosys, which rose 2.3 per cent, was the second-biggest contributor. M&M, Tech Mahindra, and Bharti Airtel were the biggest gainers in percentage terms.

HDFC Bank, whose shares are down 15 percent so far this year, can support the market going ahead, believe experts.

“HDFC Bank has been a consistent wealth compounder, and as performance gets back on track after the merger, investors are trying to capitalise on it. As the post-merger situation settles down, institutional investors return to that stock. Until the election results come, the markets will sway based on whatever is the prevalent sentiment regarding elections,” Mukherjea.

Barring one, all 13 sectoral indices compiled by the BSE ended with gains. Information technology (IT) stocks, whose fortunes are linked to the prospects of the US economy, were among the best-performing index.

“The participation of major players in the banking and IT sectors, coupled with cues from the US markets, is expected to be crucial in the future. Traders are advised to adjust their strategies accordingly, focusing on stock selection,” said Ajit Mishra, senior vice president of research at Religare Broking.

Overall, market breadth was mixed, with 2,040 stocks advancing and 1,798 declining. More than four-fifths of Sensex stocks gained. The combined market capitalisation of BSE-listed firms rose by Rs 3.1 trillion to Rs 407.4 trillion.

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First Published: May 16 2024 | 11:57 PM IST

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