Sensex, Nifty open in green as Fed rate cut hopes grow after US inflation data

Benchmark stock market indices opened higher on Thursday driven by gains in metals and IT stocks.

This upward tick came as expectations for increased foreign inflows grew, following US inflation data that strongly indicated a Federal Reserve rate cut in the upcoming week.

The S&P BSE Sensex added230.45 points to 81,753.61, while the NSE Nifty50 gained 97.40 points to 25,015.85 as of 10:28 AM.

Dr VK Vijayakumar, Geojit Financial Services said that the latest US inflation numbers are mildly positive for markets.

“August CPI inflation coming at 0.2% has brought down the 12-month inflation to 2.5% from 2.9% earlier. This paves the way for a rate cut by the Fed in September. But since core inflation continues to remain high at 3.2% the Fed is likely to be cautious and refrain from a 50bp rate cut, finally settling for a 25bp rate cut. CPI inflation in India also is expected to be low at around 3.5% in August.

This can facilitate a rate cut by the MPC in 2024 itself. In brief, the benign inflation conditions and prospects for rate cuts are positives for stock markets,” he said. “FIIs turning buyers in the cash market during the last three days is another indication that the market will continue to be resilient.

The record Rs 3.23 lakh crore application money from 89 lakh investors for Bajaj Housing Finance IPO is a reflection of the humongous liquidity chasing stocks in the Indian market now. The bullish undercurrent of the market will continue,” added Vijayakumar.

The Nifty Midcap100 index rose by 0.57%, while the Nifty Smallcap100 index also performed well, though more modestly, increasing by 0.36%, suggesting continued interest in smaller firms.

Meanwhile, the India VIX, often referred to as the fear gauge of the market, experienced a decline of 3.35%.

Early trade saw positive performance across all Nifty sectoral indices, with no sectors in the red.

The healthcare sector led the gains, with Nifty Midsmall Healthcare rising 1.37% and Nifty Healthcare Index climbing 1.18%. Nifty Pharma also showed strong performance, increasing by 0.87%.

The consumer-oriented sectors performed well, with Nifty Consumer Durables and Nifty FMCG advancing 0.87% and 0.42% respectively. The auto sector saw significant gains, with Nifty Auto rising 0.61%.

Financial services sectors showed modest growth, with Nifty Financial Services up 0.27%, Nifty Financial Services 25/50 increasing 0.25%, and Nifty Bank climbing 0.25%. Nifty Private Bank saw a slight uptick of 0.17%, while Nifty PSU Bank performed better with a 0.61% increase.

Other sectors also posted gains, including Nifty Metal (up 0.55%), Nifty Oil & Gas (rising 0.40%), Nifty Realty (increasing 0.30%), Nifty IT (advancing 0.17%), and Nifty Media (up 0.14%).