Sensex gains 450 pts, Nifty above 25,950: Softer US inflation data among key factors behind market rise

Factors behind market rise

Indian benchmark indices closed in the green on December 19, snapping a four-session losing streak. Cooling US inflation data, stronger rupee and more were among the key factors behind the uptrend in the markets.

Sensex closed 447 points higher (0.53 percent) at 84,929.36, while Nifty 50 rose 150.85 points (0.58 percent) to end the session at 25,966.40.

Broader markets outperformed benchmark indices, with Nifty Smallcap 100 and Nifty Midcap 100 indices closing more than 1 percent higher each.

Cooling US inflation signal more Fed rate cuts:

US consumer prices rose less than expected in the year ending on November. US consumer prices rose 2.7 percent year-on-year in November, slowing from a 3 percent increase in the 12 months through September.

The moderation in the in the US Consumer Price Index, reported by the Labor Department's Bureau of Labor Statistics on Thursday, has reignited hopes for more rate cuts by the US Federal Reserve in the near future.

However, analysts cautioned the data was distorted lower by the government shutdown and could not be taken at face value.

Lower interest rates in the US make emerging market equities like India attractive for foreign portfolio investors as Treasury yields and dollar typically decline.

Asian share markets held Wall Street-driven gains on Friday while the yen eased after the Bank of Japan raised interest rates to a three-decade high and left the door wide open to further tightening. Japan's Nikkei was up 1.3 percent, having tracked an overnight rally on Wall Street. South Korea's KOSPI rose 0.8 percent and tech-heavy Taiwan's TAIEX climbed 1.3 percent encouraged by stellar results from chipmaker Micron Technology. MSCI's broadest index of Asia-Pacific shares outside Japan added 0.7 percent, while Chinese blue chips gained 0.6 percent.

Rupee strengthens:

Indian Rupee appreciated for the third time in a row on December 19 on possible support from the Reserve Bank of India (RBI), currency experts said. The domestic currency opened at 90.15 against the US dollar, as compared to 90.25 against the greenback at previous close.

In the last three days, Indian rupee has appreciated 1.04 percent against the US dollar, according to the Bloomberg data. “Corporate dollar inflows and broad dollar weakness supported rupee for a second straight day,” said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

The rise in the rupee against the US dollar may have also boosted Indian equities.

FII buying:

On the institutional front, FIIs extended their buying for a second consecutive session on December 18, purchasing equities worth nearly Rs 600 crore, while DIIs remained strong buyers with inflows of Rs 2,700 crore.

A lower US policy rate could spur stronger foreign inflows into India, bolster the rupee and improve liquidity, said Prashanth Tapse, senior vice president (research) at Mehta Equities.

Strong Accenture results:

Accenture released better-than-expected first-quarter results on Thursday, driven by artificial intelligence (AI) solutions that help clients integrate the technology to enhance productivity.

The IT consulting firm reported revenue of $18.74 billion, compared with analysts' average estimate of $18.52 billion, according to data compiled by LSEG. New bookings during the quarter increased 12 percent to $20.9 billion, with consulting bookings of $9.88 billion and managed services bookings of $11.06 billion.

The US-based IT giant's management, in a post-earnings investor call Thursday, highlighted that the pace of overall and discretionary spending was at the same level as the previous year.

Heavyweight Indian IT stocks including Infosys, Tata Consultancy Services (TCS) and Wipro were trading in the green.

Also, the US consumer price index report for November showed headline annual inflation was at 2.7%, below the 3.1% expected by economists polled by Dow Jones. The softer reading boosted expectations of another interest rate cut by the US Federal Reserve, which may provide US technology companies with more discretionary spending budget, boosting prospects for Indian IT companies.

Pharma stocks gain:

Among top sectoral gainers, pharma stocks advanced 1.3% as the United States defense bill, which includes the US Biosecure Act, is expected to propel global innovator pharma companies to continue diversifying their supply chains away from China. Wockhardt Pharma, Divi's Laboratories, Laurus Labs led the gains

Citi analysts said the move could potentially benefit Indian contract development and manufacturing organisations (CDMOs).

Technical View:

"Immediate resistance is placed at 25,900–26,000, while key supports are seen at 25,700 and 25,600. As long as Nifty holds above the 25,500 mark, a selective buy-on-dips approach remains favorable, subject to strict stop-loss discipline. Given prevailing volatility and global uncertainties, traders are advised to stay selective and adopt a buy-on-dips strategy. Prudent leverage, tight trailing stop-losses, and staggered profit-booking are recommended. Fresh long positions should be considered only on a sustained breakout above 26,100, supported by continuous monitoring of global cues and key technical levels," said Amruta Shinde, Technical & Derivative Analyst at Choice Equity Broking Private Limited.

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