BSE’s Sensex gained 742 points, or 1.1%, to close at 65,675. NSE’s Nifty rallied 231 points or 1.1% to close at 19,675.
“The biggest reason for gains today is the favourable US inflation data along with the S&P, Dow and Nasdaq seeing its largest gain since April this year,” said Aamar Deo Singh, head advisory at Angel One Broking.
On Tuesday, S&P 500 jumped 1.9%, NASDAQ 100 gained 2.13% and Dow Jones rose 1.4% after US consumer inflation in October increased 3.2% from the same period last year. The reading was lower than what Wall Street anticipated and raised expectations that the US Federal Reserve might end its fastest rate-hiking spree since the 1980s. Some market participants are even anticipating a rate cut in the US later in 2024.
ING said the so-called “supercore” measure of inflation – services excluding energy and housing costs – came in at a benign 0.2% from the previous month.
“The Federal Reserve has got to be pretty happy with this and unsurprisingly, it has reinforced market expectations that the policy rate has peaked,” said ING’s chief international economist James Knightley in a note. “With 2% inflation looking possible by next summer the pricing of rate cuts will intensify.”
Elsewhere in Asia, China advanced 0.5%, Hong Kong rose 3.9%, South Korea gained 2.2% and Taiwan rose 1.2%.The pan-Europe index Stoxx 600 ended up 0.4%.
At home, analysts said though the momentum for the market is favourable it might be overbought in the short-term. The Nifty could face a hurdle at 19,800 levels.
“The important point is that after a long time it succeeded to trade above the 50-day SMA (simple moving average) which is largely positive,” said Shrikant Chouhan, head of equity research at Kotak Securities. “We are of the view that the short-term market texture is robust but due to temporary overbought conditions, we could see positive consolidation activity in the near future.”
Large-cap stocks still have more room to run up in the short term, said analysts.
“The valuations of Nifty 50 stocks are slightly below 5-year forward multiple and they are fair,” said Kumar Manish, head of research at brokerage BOB Capital Markets. He believes that domestic state elections may be another important market driver to watch out for.
On Wednesday, information technology (IT) stocks were among the top gainers with the NSE IT Index jumping 2.6% as investors moved to discount the likelihood of US interest rates peaking in these stocks. Infosys moved up by 2.8% and TCS advanced 2.31%.
“IT stocks have seen a rally of more than 2% and crossed its 20-day SMA levels on Wednesday,” said Amol Athawale, vice president, technical research at Kotak Securities. “Large- and mid-cap IT stocks can do well in the near future and the bullish pattern is likely to continue.”
Foreign portfolio investors net bought shares worth ₹550 crore. Domestic institutions were buyers to the tune of ₹609 crore.