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Informist, Friday, Sep 20, 2024

By Anjali Singh

MUMBAI – With concerns of a possible recession in the US easing after largely positive economic data and a higher-than-expected 50 basis points rate cut by the Federal Reserve, the optimism there spilled over to the Indian market, with the benchmark indices ending at new highs after a volatile session. Some analysts said the surge was driven by liquidity.

The US Fed's commentary hinted at another 50 bps rate cut in 2024 and likely more cuts in 2025 and 2026. According to Krishna Appala, senior research analyst at Capitalmind Research, this is encouraging for the global economy.

Some market participants believe the 50-bps cut by the US Fed diminishes recessionary woes, while others believe it would take some time for the impact to show. A 50-bps cut in this meeting and the upcoming potential rate cuts will have a lagging effect on the US economy, SimranJeet Singh Bhatia, senior research analyst at Almondz Financial Services said. Bhatia compared it with China, where the country's central bank is struggling to revive the economy despite rate cuts. 

"The US interest rate cut has triggered a downward spiral in both Indian and US bond yields, making India's financial assets more attractive and could result in robust dollar flows going ahead," Prashanth Tapse, senior vice-president of research at Mehta Equities, said in a note.

Both the indices ended the session at fresh highs, with the Nifty 50 index closing 1.5% higher to 25790.95 points and the BSE Sensex settling 1.6% higher at 84544.31 points. Meanwhile, the 50 stock index also hit a fresh lifetime high of 25849.25 points, while the 30-stock index hit a record high of 84694.46 points intraday. 

Shares of index heavyweight private banks and automobile companies led the gains in the benchmark indices. Mahindra & Mahindra, ICICI Bank, and JSW Steel were the top gainers in the Nifty 50 index.

Shares of automobile companies witnessed some buying interest today. Apart from M&M, Eicher Motors and Maruti Suzuki India were also among the top gainers in the 50-stock index. Nifty Auto was the second best-performing sectoral index, closing 1.9% higher. Many of these stocks went through a corrective phase recently and traded around their support zones, Ruchit Jain, lead research analyst at 4paisa, said. Owing to this, the favourable risk-reward ratio led to some traction in these stocks, Jain added. Automobile stocks were also up on expectation of a soft landing in the US and hope of the Reserve Bank of India would take cues from the US Federal Reserve for rate cuts.

After the rate cut by the Fed, market participants now turn their heads to other central banks, including the RBI. The market is still divided on whether the RBI will opt for rate cuts soon. "In India, the RBI's inflation target is set at 4%, and with the CPI Index for August 2024 at 3.6%, this indicates a possibility of a rate cut in the near future. The real impact will be felt when the RBI actually begins cutting rates, as we can expect to see an improvement in credit growth," Appala of Capitalmind Research. However, as per Bhatia, the monetary policy committee was clear about its stance in the last meeting and the likelihood of a rate cut will depend on economic data.

Shares of metal companies also gained and helped indices rise in early trade. These stocks gained on the back of positive commentary on the sector by foreign brokerage firms Macquarie and Morgan Stanley. Media reports quoted Macquarie as saying that steel companies are well-positioned to benefit from domestic price premiums to import parity, steady leverage, and easing input costs. Morgan Stanley also noted that the domestic demand environment for steel remains strong, but so does domestic supply. Nifty Metal index ended the session 1.7% higher, with its constituent Jindal Stainless leading the gains.

Select information technology stocks such as Tata Consultancy Services and LTIMindtree closed in the red. The sector witnessed some pressure again today after investors booked profits on Thursday. IT stocks had rallied recently, primarily on hopes of a rate cut by the US. While the frothy valuations remain a concern for the sector, the focus on the market will be on margins and overall financial performance of these companies in the upcoming quarter, Bhatia of Almondz Financial services said.

Pharmaceutical companies Zydus Lifesciences and Lupin were in focus after BofA Securities cut the target prices of these stocks on concerns over Mirabegron sales, according to a post on X by CNBC TV18. The US Court of Appeals for the Federal Circuit recently said the US district court made an error while invalidating a patent covering Mirabegron drug, as per brokerage Nomura.

Shares of shipbuilding companies gained sharply today, with those of Cochin Shipyard hitting the 10% upper band. The government on Thursday announced steps, including reducing certain charges at ports and the purchase of five additional second-hand container vessels by Shipping Corp of India, to resolve the sector-related problems of exporters and importers. The Shipping Corp of India will separately buy container vessels and the company has already placed an order for one, Ports, Shipping and Waterways Secretary T.K. Ramachandran said.  

* Of the Nifty 50 stocks, 43 rose, 6 fell, and 1 was unchanged

* Of the Sensex stocks, 26 rose and 4 fell

* On the NSE, 1,853 stocks rose, 924 fell, and 71 were unchanged

* On the BSE, 2,442 stocks rose, 1,502 fell, and 115 were unchanged

* Nifty Realty: up 3.1%; Nifty Auto: up 1.9%; Nifty PSU Bank: down 0.1%

BSE                                               NSE
Sensex: 84544.31, up 1359.51 points, or 1.6%      Nifty 50: 25790.95, up 375.15 points, or 1.5%

End

US$1 = 83.56 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Deepshikha Bhardwaj

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