Indian stock indices rose substantially on Monday, defying a sharp downturn in the overnight US markets, possibly due to inherent strength in domestic market fundamentals.
Continued buying by foreign portfolio investors (FPIs) also somewhat cushioned the stock indices from a steep fall in the US market. Strong buying in banking, FMCG, and private banks, also supported the domestic stocks.
Sensex closed at 81,559.54 points, up 375.61 points or 0.46 per cent, and Nifty closed at 24,936.40 points, up 84.25 points or 0.34 per cent.
“Two factors are likely to weigh on markets: one, the outcome of the US presidential elections and two, the Fed decision on rate cut,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
“Investors may wait and watch for clarity on these crucial developments. Meanwhile, weakness in the market can be used to slowly accumulate high-quality largecaps and defensives like pharmaceuticals,” said Vijayakumar.
Going ahead into this week, the markets will monitor both retail and wholesale inflation data for fresh cues.
Breaching 5 per cent in June, the retail inflation rate in India softened drastically in July. According to data released by the Ministry of Statistics and Programme Implementation, retail inflation or Consumer Price Index in July was at 3.54 per cent.
Inflation has been a concern for many countries, including advanced economies, but India has largely managed to steer its inflation trajectory quite well.
Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. The repo rate is the rate of interest at which the RBI lends to other banks.
“A lot will depend on the performance of global markets, particularly the US, given the lack of major domestic triggers. We advise maintaining balanced positions on both sides, with an emphasis on risk management in the interim,” said Ajit Mishra – SVP, Research, Religare Broking Ltd.