The US Federal Reserve’s signal of a possible interest rate cut in September helped the benchmark Nifty 50 index cross 25,000 for the first time, while the Sensex also breached 82,000 points in intraday trade.
After hitting a high of 25,078, the Nifty closed at 25,011, gaining 60 points, or 0.24 per cent. The Sensex hit 82,129 before closing the day at 81,868, up 126 points, or 0.15 per cent. The Nifty had first closed above 20,000 points on September 13, 2023. The latest 5,000 points, or 25 per cent, move has come in over 219 days. Meanwhile, the latest 1,000-point move (1.2 per cent) on the Sensex took 11 sessions.
The Nifty has rallied 15 per cent this year — the best return among major global markets — amid optimism around India’s growth prospects and driven by robust flows.
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On Thursday, the US central bank left the federal funds rate in a range of 5.25 per cent to 5.5 per cent but signaled that rate cuts could be in the offing as early as next month if inflation data remains favourable. Fed Chief Jerome Powell said if the balance of risks was consistent with the rising confidence in containing inflation and a solid labour market, the rate cut could come as early as September. Further, in a statement, the Federal Open Market Committee (FOMC) said there had been further progress in achieving its 2 per cent inflation target.
“Rate cuts will happen faster than what was initially priced. And markets are rejoicing. Inflation has come close to its target, but markets have ignored the concerns around West Asia. I’d say this space needs to be monitored,” said U. R. Bhat, co-founder of Alphaniti Fintech.
Despite headwinds, such as rising tensions between Israel and Iran, the recent hike in capital market taxes, and less buoyant corporate earnings, markets have managed to rise thanks to robust flows. Last month, flows from both foreign as well as domestic investors remained strong. Foreign portfolio investors (FPIs) pumped in approximately Rs 34,000 crore, while domestic institutional investors were buyers to the tune of around Rs 20,000 crore in July.
“The market outlook largely hinges on liquidity. There is a feeling that a correction is not coming, so people are putting money into the market now,” said Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies.
Some experts do not rule out consolidation after this year’s sharp upward trend.
“The significant market outperformance in recent years could lead to periods of flat growth in indices like Nifty or Sensex. This might test investors’ patience, as future returns could be muted,” said Balasubramanian.
The market breadth was weak, with 2,383 stocks declining and 1,577 advancing. The total market capitalisation declined by approximately Rs 75,000 crore to around Rs 461 trillion. The fall was on the back of a nearly 1 per cent decline in the Nifty Smallcap 100 and the Nifty Midcap 100 indices.
HDFC Bank, which rose 1.4 per cent, was the biggest contributor to the Sensex gains, followed by Reliance Industries, which rose 0.7 per cent. Meanwhile, M&M fell 2.7 per cent and was the biggest negative contributor, followed by Infosys.
First Published: Aug 01 2024 | 11:32 PM IST
