Why Sensex Surged Over 1,100 Points And Nifty Hit Fresh 10-Month High On Friday?

The Indian equity benchmarks soared to fresh 10-month highs on Friday on the back of strong global markets. Global markets surged after lower than expected inflation data in US ignited hopes of slower pace of interest rate hikes by the US Federal Reserve which has been on interest rate hike spree to control decadal high inflation. 

The Sensex rose as much as 1,160 points and Nifty 50 index reclaimed its important psychological level of 18,300 for first time since January 18, data from the National Stock Exchange showed.

Asian stock markets surged Friday after U.S. inflation eased by more than expected, spurring hopes the Federal Reserve might scale down plans for more interest rate hikes.

Hong Kong’s market benchmark jumped 5.4 per cent. Seoul and Sydney rose almost 3 per cent. Shanghai and Tokyo also advanced. Oil prices edged higher.

Wall Street’s benchmark S&P 500 index soared 5.5 per cent on Thursday for its best day in 2 1/2 years after the government reported consumer prices rose 7.7 per cent over a year ago in October. That was lower than the 8 per cent expected by economists and the fourth month of decline.

Back home, the Sensex jumped 1,181 points to close at 61,795 and Nifty 50 index advanced 321 points to settle at 18,350.

HDFC, HDFC Bank, Infosys, Tata Consultancy Services, Reliance Industries, HCL Technologies and Tata Steel were among the top movers in the Sensex. They collectively contributed over 1,000 points towards gain in the 30-share Sensex.

Buying was visible across sectors as seventeen of 19 sector gauges compiled by the BSE were trading higher led by the S&P BSE IT index's over 3 per cent gain. IT stocks were witnessing buying interest on hopes that softening inflation in US, the biggest market for Indian IT companies, will lead to stronger order pipeline for them, analysts said.

"With the October inflation in the United States coming at 7.7 per cent against expectations of 7.9 per cent and previous month’s inflation of 8.2 per cent, thereby hinting of some softening in inflation rates in the US. Since the US does not have any kind of shortage of Natural Gas and Oil for the winters, there are expectations of the inflation to further soften and consumables prices to stabilize at same levels going ahead. Also, as we know that most of the large cap Indian IT companies have their largest share of revenue coming from their clients based in the US, so this is a positive news that might revive the sector further already under hope of improving attrition rates and margins upcycle from here on," says Anmol Das, head of research at Teji Mandi.

Metal, Banking, Financial Services and Consumer Durable indexes also rose between 1-3 per cent.

Mid- and small-cap shares were underperforming their larger peers as S&P BSE MidCap and S&P BSE SmallCap indices rose 0.2 and 0.4 per cent each respectively.

HDFC Bank was top Nifty gainer, the stock jumped nearly 7 per cent, its biggest single-day gain since April, to Rs 1,625. HDFC, Infosys, HCL Technologies, Tata Consultancy Services, Tech Mahindra, Tata Steel, Wipro, Reliance Industries and Bajaj Finserv also rose between 1-4 per cent.

On the flipside, NTPC, State Bank of India, Kotak Mahindra Bank, Dr Reddy's Labs, Mahindra & Mahindra and ICICI Bank were among the notable losers.

Among the individual shares, Zomato rallied over 8 per cent in morning trade on Friday after the company announced that it has narrowed its consolidated net loss to Rs 250.8 crore in the second quarter ended September.

The stock rose 8.05 per cent to Rs 69.10 on the BSE.

The overall market breadth was positive as 1,874 shares were advancing while 1,492 were declining on the BSE.