Indian Markets Hit Record Highs on Fed Rate Pause Hopes

Indian indexes Nifty 50 and Sensex hit fresh all-time highs led by metals and realty stocks on hopes of a Fed rate pause.
Sentiment boosted after U.S. inflation data showed signs of moderation, reducing rate hike fears.
All major sectors saw gains, with metals and realty stocks rising the most.
Small-caps and mid-caps also rallied after recent volatility.
Individual stocks like Bombay Dyeing and Suven Pharma surged on corporate news.

reuters.com

Relevant topic timeline:

8/20/2023

Investors turn cautious amidst high inflation and currency volatility

### Summary India's retail inflation in July rose to 7.44%, higher than market expectations, and is expected to remain elevated in Q3. The global currency market is experiencing significant turbulence, with the USD appreciating despite economic weaknesses. Heightened inflation and volatility in the currency market pose risks to the Indian market. ### Facts - India's retail inflation in July was 7.44%, exceeding market expectations. - Elevated inflation is expected to continue in Q3. - The global currency market is experiencing turmoil, with the USD appreciating despite economic frailty. - FII outflows have increased, but India's equity market is performing better than other emerging markets. - The RBI has revised its inflation forecast upward and expects inflation to decrease to 5.7% in Q3. - High interest rates and inflation are expected to impact corporate earnings growth and valuation. - India's one-year forward P/E valuation has decreased from 20x to 18.5x. - Bond yields have increased, leading to a divestment of equities and acquisition of bonds. - The domestic market is supported by restrained FII divestment, robust purchasing by DIIs and retail participants, and outperformance compared to other emerging markets. - Selling in global equities has increased due to concerns of deflation and defaults in China's realty and finance sectors. - The author expects the selling from FIIs to continue in the short-term due to elevated global bond yields, US credit downgrade, and slowdown in emerging markets, but India will continue to outperform. - In the last month, the MSCI World index was down 4.2% compared to MSCI India's 1.85% decrease.

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Posted 9/14/2023, 4:36:09 AM