The Nifty50 index on Tuesday reclaimed the 18,000 mark after five months, thanks to sustained inflows from foreign portfolio investors (FPIs) and positive global cues. However, global markets lost steam after data showed that US consumer prices remained stubbornly high in August. The data came after the close of the Indian markets.
The US Labour Department repo¬rted that its consumer price index rose 8.3 per cent year-on-year in August, down from 8.5 per cent in July but higher than expected. In the run-up to the release of the data, investors were hoping that inflation would moderate and allow the US Federal Reserve to slow its pace of rate hikes.
The Nifty rose 133 points, or 0.7 per cent, to finish at 18,070, the highest close since January 18. The Sensex gained 456 points to settle at 60,571 — less than 2 per cent shy of a new lifetime high.
FPIs pumped in Rs 1,956 crore on Tuesday, taking this month’s buying tally past the Rs 10,000-crore mark.
The gains on Tuesday came despite India’s retail inflation rising, to 7 per cent, after falling for three straight months. The rise was largely due to a surge in food prices, and led to speculation about pressure on the Reserve Bank of India (RBI) to hike interest rates.
“Though domestic inflation numbers were mildly disappointing, they should be much better going forward. Crude oil prices, a huge component of our inflation, are softening. A steep hike by the RBI, as priced in earlier, may not be required. Perhaps that’s the reason our markets are sanguine,” said U R Bhat, co-founder of Alphaniti Fintech.
The Indian markets have outperformed most global equities over the past three months as the country’s economic prospects are seen better than the rest of the world.
Naveen Kulkarni, chief investment officer, Axis Securities PMS, said , “The current market buoyancy is based on the expectation that inflation has peaked, along with softening crude prices…but we would advise investors to raise some cash at the current levels.”
From this year’s low on June 17, the benchmark indices have rallied close to 18 per cent. This has pushed the valuations into expensive territory. The Nifty now trades at over 20 times its estimated one-year forward earnings compared to the historical average of 17 times.
The market breadth was strong, with 1,818 stocks advancing and 1,677 declining. Four-fifths of the Sensex firms ended the session with gains. HDFC Bank rose 1.27 per cent and contributed the most to the index’s gains, followed by Reliance Industries, which rose 0.8 per cent.