Sensex, Nifty Jump To Extend Gains For Third Straight Session

Equity benchmarks soared on Monday to hit a three-week high, extending gains for the third straight session after logging their first weekly climb in three on Friday, tracking a bull run in risk assets globally on expectations of a subdued US inflation reading later this week.

The 30-share BSE Sensex index climbed 321.99 points, or 0.54 per cent, to close at 60,115.13, and the NSE Nifty-50 index jumped 103 points, or 0.58 per cent, to settle above 17,900 level.

Titan experienced the largest gain of the Sensex equities, up 2.39 percent, followed by Axis Bank, Tech Mahindra, and Tata Steel. The rally was supported by gains made by RIL, Infosys, TCS, ICICI Bank, Bajaj Finance, and L&T.

HDFC experienced the largest decline, by 0.43 per cent, along with HDFC Bank and Nestle.

“Firm global market cues triggered an upsurge in local benchmark indices as Sensex closed above the crucial 60,000 mark on buying in IT and realty stocks. In recent sessions, falling global crude oil prices and sliding US Dollar index have encouraged domestic investors to increase their equity exposure," said Shrikant Chouhan, Head of Equity Research for Retail at Kotak Securities.

What has helped domestic stocks is the capital inflows. Indeed, Foreign Institutional Investors (FIIs) were net buyers to the tune of Rs 2,132.42 crore on Friday, as per the latest exchange data.

A fall in oil prices also buoyed shares as India, the third-largest oil importer in the world, gains from a decrease in prices since it lowers imported inflation.

The likelihood of more interest rate increases in the US and Europe, as well as concerns about demand in the wake of China's implementation of COVID-19 limitations, caused crude prices to decline.

"Overall, the sentiment has been good because oil prices have come down, so that augurs well for our market and global markets have been positive," Neeraj Dewan, Director at Quantum Securities, told Reuters.

But the run-up in domestic stocks was at risk as inflation data, due after market hours at 5.30 pm, was projected to show a surge back up to near 7 per cent, stalling a three-month downtrend, according to a Reuters survey of economists.

Globally, though, traders gamble that US inflation is about to peak, which caused the dollar to decline and European equities and US futures to extend their rally.

That even as policymakers have increased their hawkish rhetoric.

Asian equity bourses also surged in low volumes trading with China and South Korea out for a holiday.

After mildly recovering from a two-year low struck last week, MSCI's broadest index of Asia-Pacific equities outside of Japan rose 0.7 per cent. After rising 2 per cent last week, the Nikkei in Japan gained an additional 1.2 per cent.

The Stoxx Europe 600 index increased for a third day, led by miners and retailers, with all significant regional benchmarks also rising.

Futures for the S&P 500 and Nasdaq 100 rose, indicating US stocks may extend gains from the previous week.

As all G-10 peers increased except for the yen, a barometer of the dollar sank for a second day, on course for its greatest two-day drop in almost three months.

After Bundesbank President Joachim Nagel indicated support for additional interest rate increases in Europe, the euro increased to its highest level in six months. News of Ukrainian victories in the war with Russia also helped to buoy confidence. 

"The Russia-Ukraine situation is creating some glimmers of hope for the market that there might be a resolution and provide some relief on the intensity of the energy shock," Hani Redha, a Multi-Asset Portfolio Manager at PineBridge Investments, told Reuters.

"For now, the balance of information we have is being interpreted as bullish by the market," added the Portfolio Manager.

Investor attention is on the US inflation data for August, which is coming on Tuesday. The headline CPI is predicted to slow to an annual rate of 8 per cent, but the core measure, which excludes food and energy, is predicted to increase.

Following two 75-basis-point increases, traders almost entirely anticipate another jumbo-sized Fed raise next week, and Fed officials' recent forward guidance has backed up that expectation.

“A downside surprise in US CPI is likely more of a concern and that could see the dollar weakening further,” Charu Chanana, a strategist at Saxo Capital Markets, said on Bloomberg Television. “That could potentially be a risk to watch.”