The sharp rally on Dalal Street has added over Rs 6.5 lakh crore to BSE's market capitalization on September 12, with both benchmark indices rising to record high, and Sensex hitting the 83,000 mark for the first time ever.
The total market capitalization of all BSE-listed companies reached a new high of Rs 467.22 lakh crore, rising by 1.4% from the previous close. Benchmark Sensex surged 1.77% or 1,440 points end at 82,962, while the BSE Mid and Smallcap indices ended with gains of 1.32% and 0.8%, respectively.
Read More: Sensex sprints to 83,000 for the first time ever, Nifty above 25,400
The rally comes as investors look ahead to next week's meeting of the US Federal Reserve to decide on the interest rate outlook.
Ajay Bagga, an independent analyst, has attributed the rally to a certainty around US Fed rate cut on September 18, when the FOMC convenes. With the outcome of the event by and large settled, foreign funds are shifting from the sidelines to invest in emerging markets such as India. After a cautious start to September due to seasonality, investors are starting to increase their allocations to EMs, said Bagga. This shift, combined with strong domestic inflows, is likely boosting momentum in India's equity market.
Prashant Tapse, analysts with Mehta Equities said that though the US CPI data may not be encouraging enough for an aggressive Fed rate cut, recent economic readings showed the US could be facing growth challenges going ahead, and hence the Fed may opt to cut the benchmark rates.
With retail money continuing to flow in despite concerns of stretched valuations, investors remain upbeat about India's resilience in a slowing global economy, Ajay Bagga added.
Earlier, Bloomberg News had reported that China may cut interest rates on $5 trillion mortgages this month to boost consumption. Some Chinese banks are preparing for reductions of up to 50 basis points. This move aims to ease China's household financial burden as domestic spending is weak, and deflation risk remains. There is also a growing concern about China missing the growth target of 5% and a souring of stock market sentiment, the report added.
Global markets too have rallied, despite a slightly hotter-than-expected US inflation report. Some US traders are anticipating Fed rate cuts of about 100 basis points by the end of 2024, starting with the next week's meeting, scheduled on September 17-18.
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