Global Stock Markets Rally as US Consumer Inflation Eases: Sensex and Nifty Hit New Peaks

Global stock markets witnessed a remarkable upswing as major benchmark indices reached new highs, drawing inspiration from the latest US consumer inflation figures for June. Both the BSE Sensex and Nifty50, India's leading indices, experienced substantial gains, propelled by the positive momentum in global equities. This article provides an overview of the notable market developments, key winners and losers, and the impact of the deceleration in US consumer inflation on investor sentiment.

Stock Market Bulls Charge Ahead as Sensex and Nifty Reach Record Highs

Key Highlights:

1. Slowing US Consumer Inflation: In June, the US consumer inflation rate exhibited a notable slowdown, declining to 3 percent, the lowest level seen since March 2021. This outcome, surpassing market expectations of 3.1 percent, bolstered confidence in global markets.

2. Record Highs for Sensex and Nifty50: The BSE Sensex surged by 532 points or 0.81 percent, reaching an all-time high of 65,925, while the Nifty50 traded at 19,534, marking a gain of 150 points or 0.78 percent. This remarkable upward trajectory was fueled by significant advancements in prominent companies such as Tata Steel, HDFC Bank, TCS, M&M, SBI, and Reliance.

3. Winners and Losers: Among the gainers on the Sensex were Tata Steel, HDFC Bank, TCS, M&M, SBI, and Reliance. Similarly, on the Nifty50, Bajaj Auto, Hindalco, and HDFC Life emerged as additional winners. Conversely, HCL Tech, Power Grid, Nestle, and Dr. Reddy's weighed down the indices.

4. Positive Movement in the Broader Market: The BSE MidCap and SmallCap indices also exhibited upward movement, registering gains of up to 0.6 percent. This indicates a broader market rally and reflects the prevailing positive sentiment among investors.

5. Resilience of the IT Sector: Despite HCL Tech's stock causing a drag on the IT index, the sector demonstrated resilience during early trading, with a gain of over 1 percent. This underscores the sector's ability to withstand challenges and maintain a positive trajectory.

6. Slump in Patanjali Foods: Patanjali Foods experienced a significant slump of 5 percent as its promoter, Patanjali Ayurved, initiated an offer for sale (OFS) to divest up to 9 percent stake. The OFS floor price, set at Rs 1,000 per share, represents a substantial discount.

Expert Insights:

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, shared insights on the market trends. He highlighted the positive impact of the deceleration in US consumer inflation on the ongoing global stock market rally. This development may influence the Federal Reserve to consider a pause in its planned rate decision on July 26, thus providing a positive global signal. Dr. Vijayakumar acknowledged the increase in India's June Consumer Price Index (CPI) inflation to 4.81 percent, mainly driven by surges in vegetable and milk prices. However, he emphasized the robust growth momentum in the Indian economy, as demonstrated by the 5.2 percent growth in the May Index of Industrial Production (IIP). Nevertheless, he cautioned that high valuations could restrict a strong bullish surge in the markets.

Global Market Outlook:

Global cues from Tokyo and Wall Street remained optimistic, with Tokyo stocks opening higher and US stocks closing on a positive note. In Tokyo, the Nikkei 225 index rose by 0.42 percent, while the broader Topix index gained 0.30 percent. This upward trajectory was primarily influenced by the cooling US inflation data, which has raised hopes that the Federal Reserve's monetary tightening campaign may soon come to an end.

Conclusion:

Global stock markets rejoiced as the US consumer inflation rate displayed a significant deceleration in June, reaching its lowest point in over a year. This outcome, combined with positive global cues, propelled the Sensex and Nifty50 to record highs. Although certain stocks faced temporary setbacks, overall market sentiment remained positive. However, caution prevailed due to concerns regarding high valuations. Investors eagerly await further developments and cues from the Federal Reserve's upcoming rate decision.