Sensex Surges Over 1,150 Points As Global Risk Sentiment Improves

Indian equity benchmarks surged on Friday, reversing sharp losses in the previous two sessions, tracking Wall Street stocks' best performance since 2020 after US inflation eased to the lowest since January and sparked hopes the Federal Reserve would tone down its aggressive tightening stance.

The BSE Sensex index jumped 1,181.34 points, or 1.95 per cent, to close at 61,795.04, and the broader NSE Nifty index climbed 321.50 points, or 1.78 per cent, to end at 18,349.70.

"With the benchmark indices touching 52 week highs and the Nifty Bank Index touching new all time highs, we remain cautiously optimistic advising investors to be agile and aware of the recent and upcoming macroeconomic events in order to make dynamic decision-making both ways," said Anmol Das, Head of Research at Teji Mandi.

"In the event of a sustainable rally and not to miss out on such opportunities, we advise to stay invested within the same portfolio while making stock specific decisions as per Q2 earnings," he added.

The rupee's strength versus the US dollar and the unabated entry of foreign cash also helped to boost confidence

The top gainer on the Sensex was HDFC, which increased by 5.84 percent. Other notable gainers included HDFC Bank, Infosys, Tech Mahindra, HCL Tech, TCS, Wipro, Tata Steel, and Reliance Industries.

M&M, SBI, Kotak, Dr. Reddy's, ICICI Bank, and NTPC, on the other hand, were among the laggards.

"Global markets witnessed a rally, as the US CPI print softened and possibly enhancing hopes of some moderation in future rate hikes by major central banks," said Shrikant Chouhan, Head of Equity Research for Retail at Kotak Securities.

"Sensex and Nifty saw positive returns this week whereas the BSE Midcap and the BSE Small-cap index witnessed marginal decline," he added.

On Friday, Asian stocks scaled a seven-week high, while the dollar dipped as expectations for a slowdown in the Federal Reserve's rapid interest rate hikes were raised by lower-than-expected US inflation reading.

MSCI's broadest index of Asia-Pacific shares outside Japan soared over 5. per cent, its biggest one-day percentage jump since March 2020, even as the index is down about 23 per cent for the year.

Data on Thursday showed the US consumer price index rose 7.7 in October from a year ago, the weakest rise since January and the first one under 8 per cent since February.

Wall Street stocks rallied, resulting in their best performance since 2020.

"It's something the market had been waiting for a long time," Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital, told Reuters. "There was a lot of money sitting on the sidelines."

Following the release of the inflation data, investors flocked to riskier assets, sending the dollar plunging and US Treasury yields to a five-week low.

But even as some Fed officials welcomed the idea of more gradual rate increases, US policymakers stressed on Thursday that borrowing costs might remain higher for longer than generally believed.

"We would not extrapolate one month of softer inflation data as indicating inflation is now convincingly on a path toward the two-per cent target," Citi Strategists wrote in a note, referring to the 2 per cent inflation target the Fed has set, according to Reuters.

"The data and market reaction is reminiscent of previous cycles of optimism regarding the ease with which the Fed might quell too-high inflation," Citi added.

Global risk assets also got a leg up from easing COVID-19 restrictions in China.

A penalty for airlines bringing in infected passengers has been eliminated in China. Quarantine periods for people close to cases and those arriving abroad have been shortened by two days.