Nifty and Sensex opened at record highs on 27 May, and mostly held above the previous session's close, as easing US consumer inflation expectations bolstered the case for the Fed rate cut this year. The University of Michigan data showed that price rise expectations moderated to 3.3 percent over the next year, from 3.5 percent earlier in May.
Even so, market experts advised caution to watch further Fed statements and actions for firm cues on any possible rate cuts. The market is anticipating a rate cut but there is uncertainty about the timing and the quantum, said Kranthi Bathini, Director of Equity strategy at WealthMills Securities, adding that the markets may take short-term solace from the inflation data.
At 11:00 am, the Sensex was up about 225 points or 0.3 percent at 75,637, and the Nifty was up about 44 points at 23,000. Earlier, in the opening trade, Sensex and Nifty hit new highs of 75,679 and 23,043, respectively.
The market breadth was negative. About 1,581 shares advanced, 1,737 shares declined, and 118 shares were unchanged.
While banking and metal stocks led the gains in Nifty 50, automobile and energy stocks were the biggest losers.
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In the broader market, both BSE Midcap and BSE Small index were up 0.5 percent.
Shares of Divi's Laboratories were in focus as the stock rose 5 percent in early trade and emerged as the top gainer on Nifty. The company's better-than-expected performance for the January-March quarter of FY24 has prompted brokerages to raise their price targets for the stock, to factor in the strong earnings.
The massive selling by FIIs has ceased and they have even turned buyers in recent days.
"Going forward, as clarity emerges on the election front, FIIs are likely to buy in India since they cannot afford to miss the post-election results rally," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Also Read | Divi's Labs' better-than-expected Q4 results trigger slew of price target upgrades
According to Vipul Bhowar, Director of Listed Investments at Waterfield Advisors, the bumper dividend payout of Rs 2.11 lakh crore from the Reserve Bank of India to the central government for the fiscal year may have caused FPIs to reconsider its strategy and temporarily halt selling.
Bhowar said that this step by the RBI will likely ease the FY25 fiscal deficit by approximately 0.2 percent of the GDP and potentially decrease the government's need to borrow from the market. "As a result, more funds could be made available for capital spending, stimulating economic growth."
The surprise decision from RBI and growing belief that the incumbent BJP government will retain majority in the ongoing elections have led to some positivity emerging in the Indian equity market, said Bathini.
He said that the selling of Indian equities by FPIs might be at an end as the election results date approaches.
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Although the market breadth has not been positive lately, Bathini expects it to improve going forward. "In the futures market, the Market Wide Open Position has been quite strong. The rally on May 23 was due to short covering and participation from FPIs," he said.
Bathini is of the view that as long as the Nifty 50 is within 22,500-23,000 range, the market can be seen as being in a positive momentum.
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