In view of the rally in global equity markets, Indian stock markets rose today. BSE benchmark Sensex climbed over 1,000 points today, led by Infosys and banking stocks, while the Nifty 50 index was above 17,300. Infosys Ltd climbed up to 4.6% after the country’s No. 2 IT services company reported higher-than-expected growth in second-quarter profit, fueled by strong margin growth. Nifty’s IT, private sector banks and public sector bank indices were up over 2% each.
Asian stocks jumped today after a rally on Wall Street despite higher-than-expected US inflation. But analysts doubt the stability of the rebound as equities rally US inflation Increased potential for higher interest rates for a longer period.
US consumer prices rose 0.4% in September compared to August, more than double the 0.2% predicted by analysts. The figures are the latest sign that inflation is becoming more embedded in the US economy, despite the Federal Reserve’s many actions to combat inflation. US stocks fell on reports initially last night, which heightened bearish concerns over rising odds of a more aggressive Fed interest rate hike. But later rebounded sharply to close up.
“There was some really interesting price action in spite of red hot CPI print driven by technical factors and position. Dollar strengthened soon after CPI print but huge reversal was seen on short covering in majors. US equities also fully in intraday S&P 500 ended 2.6% higher, after CPI print fell near 2%. Nasdaq closed 2.2% higher which started buying after completing a 50% retracement of the rally from the S&P500’s peak COVID lows.
US stocks are down more than 25% this year as the central bank begins tightening policy to curb inflation, giving investors an idea of just how much damage is left for share prices. .
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services echoed the same view. “The market’s uncanny ability to surprise was in full swing overnight when the S&P 500 rose 5% from the day’s low despite the September CPI inflation numbers coming in slightly above expectations. Market conditions like this uptick.” There are rallies. Share Market High inflation expectations and the consequent continuation of the Fed’s stance were oversold. This oversold market position triggered short covering which resulted in an incredible 1,400 upside move in the Dow from its lows,” he said.
“Similar short covering and sharp rallies can happen in India as well. However, the big question is about the sustainability of this rally. Under the current unfavorable global macro build-up, the rally is unlikely to extend beyond that level,” he said.
Commenting on the results of major IT giants like TCS, Infosys And Wipro, Vijayakumar said, “An important conclusion from the IT results announced so far is that the segment is performing well and management’s commentary is optimistic. After a sharp correction in IT stocks from their highs, the segment now has value.” Financials too, especially leading banks, are likely to come up with very good numbers in the coming days. These two segments – IT and financials – may provide flexibility to the market in the near term.”
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