The equity benchmark indices rallied on Thursday as investors cheered firm global cues, expectations of an interest rate cut by the Reserve Bank of India (RBI) and fresh foreign fund inflows.
The Sensex jumped 654.70 points or 0.81 percent to 81,652.95, while the broader Nifty 195.55 points or 0.79 percent to 24,815.75, at around 12:10 PM.
Dr. Reddy's Laboratories, Trent, Grasim Industries, Adani Ports and Special Economic Zone, and ETERNAL led the charge among the gainers, rising up to 5 per cent.
Here are the key drivers behind Thursday’s rally:
1. Rate Cut Optimism: The RBI is widely expected to announce its third straight repo rate cut at the end of the Monetary Policy Committee (MPC) meeting on Friday. A poll by Moneycontrol among economists and bank treasury heads suggests a 25 basis points cut is likely.
Retail inflation slowed to a near six-year low of 3.16 percent in April, giving the central bank room to focus more aggressively on supporting growth. The RBI expects average inflation to remain around 4 percent for the financial year.
MPC Poll | RBI likely to cut repo rate by 25 bps in June policy
2. Firm Asian Markets: Major Asian indices were trading in the green, with South Korea’s Kospi, Hong Kong’s Hang Seng, and China’s SSE Composite showing positive momentum. Although US markets closed mixed overnight, the tone in Asia remained upbeat, offering support to local shares.
3. Foreign Investor Buying: Foreign Institutional Investors (FIIs) returned as net buyers on Wednesday, pumping in Rs 1,076.18 crore into Indian equities. Renewed overseas inflows provided added comfort to the markets.
4. Hopes of easing US-China Trade Tensions: Sentiment was buoyed by hopes of fresh dialogue between the US and China. Reports indicated a possible phone call between US President Donald Trump and Chinese President Xi Jinping later this week. The news comes after Trump accused China of breaching an earlier trade agreement, but investors remain hopeful of a thaw in tensions that could lift global trade prospects.
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5. Falling Crude Prices: Global benchmark Brent crude slipped 0.12 percent to USD 64.78 per barrel. A decline in oil prices is typically positive for India, which imports over 80 percent of its oil needs.
6. Hopes of US Fed Rate Cuts: US President Donald Trump intensified pressure on the Federal Reserve to slash interest rates, citing weak jobs data. Private payrolls in the US rose by just 37,000 in May, far below expectations, adding weight to the case for a rate cut by the Fed in the coming months, reported Reuters.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, noted "The US 10-year bond yield has declined to 4.36 % and, given the slowing US economy, is likely to trend lower. This will turn out to be good for EMs like India in the medium term."
7. ECB Policy Support: The European Central Bank is also expected to announce another interest rate cut at its policy review later today. With inflation softening and growth remaining weak in the euro zone, markets expect continued policy support from the ECB. This has improved risk appetite globally.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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