Indian stock markets rallied today, tracking a reversal in global equity markets. The benchmark BSE Sensex rose over 1,000 points today while the broader Nifty 50 index was above 17,300, sustained by Infosys and banking stocks. Infosys Ltd rose as much as 4.6% after the No. 1 IT services company. The country’s 2 reported a bigger-than-expected increase in second-quarter profit, fueling strong margin growth. IT Nifty, private sector banks and public sector banks indices rose by over 2% each.

Asian shares jumped today, following a rebound on Wall Street despite higher-than-expected US inflation. But analysts are skeptical about the sustainability of the reversal in equity as US inflation has increased due to an increase in the likelihood of higher interest rates for a longer period of time.

US consumer prices rose 0.4% in September compared to August, twice the 0.2% analysts had forecast. The data is the latest sign that inflation is becoming more stagnant in the US economy, despite several Federal Reserve actions to counter the trend. Last night US stocks initially fell on the report, which exacerbated recessionary concerns about the increased chances of more aggressive Fed interest rate hikes. But rebounded later to close sharply higher.

“There was very interesting price action despite the IPT red hot print driven by technical and positioning factors. The dollar strengthened immediately after the CPI print but saw a huge reversal of short covering in the majors. US equities also saw an intraday full reversal. After falling nearly 2% after the CPI print was posted, the S&P 500 ended 2.6% higher. Nasdaq ended with a gain of 2.2%. “The move appears to have been driven by algo trading programs that started buying after the S&P500 completed 50% of the rally from the COVID highs,” IFA Global said in a note.

US stocks have fallen more than 25% this year as the central bank began tightening policy to curb inflation, leaving investors to weigh how much damage remains to share prices.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, echoed the same sentiment. “The market’s ability to surprise overnight was unnerving as the S&P 500 rallied 5% from the day’s lows despite September’s slightly higher-than-expected CPI inflation number. Such sharp rallies occur because of the market position. The stock market was oversold on higher inflation expectations and the continued hawkish Fed stance as a result. This oversold market position prompted short covering and resulted in an incredible 1,400 rally in the Dow from its lows,” he said.

“Similar short coverage and sharp rallies can also happen in India. The big question, however, is the durability of this rally. Under the current unfavorable global macro structure, the rally above a level is unlikely to last,” he said.

Referring to the results of major IT heavyweights like TCS, Infosys and Wipro, Vijayakumar said, “Two important takeaways from the IT results announced so far are that the segment is doing well and the management commentary is optimistic . After the sharp correction in IT stocks from Financials are also likely to get very good numbers, especially central banks, in the coming days. -term.”

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