Mumbai: Indian Stock Markets Continue Recovery Amid Global Optimism
Buoyed by encouraging economic data from the United States and positive global cues, the Indian stock markets extended their recovery rally this week. With the US government signaling a potential rate cut, expected to be announced in September, domestic markets are anticipated to respond favorably when they open on Monday.
Federal Reserve Chair Jerome Powell’s recent remarks indicating “the time has come” for a monetary policy adjustment led to a surge in US markets on Friday. The S&P 500 index, in particular, saw gains that brought it closer to achieving a new record high.
Market analysts predict that a rate cut of up to 25 basis points in September will likely be welcomed by the markets in the short term. The future trend, however, will depend on whether central banks maintain an optimistic stance on continuing accommodative policies and potential additional cuts in future meetings.
Indian sectors poised to benefit from a Fed rate cut include Information Technology (IT), Banking, Financial Services, and Insurance (BFSI), automotive, and real estate. Experts believe that the rate cuts will be positively received by Indian markets, given the Reserve Bank of India’s tendency to follow the US Federal Reserve’s lead on interest rates.
This week, the Indian markets were also buoyed by positive global sentiment stemming from ceasefire discussions between Israel and Hamas and a decline in crude oil prices. However, inflationary pressures in Japan and the appreciation of the Japanese Yen moderated market gains towards the week’s end.
IT stocks, which are heavily dependent on the US market, saw limited movement due to profit-taking following an initial rally. Conversely, Public Sector Undertaking (PSU) banks fully recovered losses from the previous week, and mid- and small-cap indices outperformed the broader market.
On Friday, the Indian equity indices closed flat. The Sensex ended the day with a marginal gain of 33 points at 81,086, while the Nifty increased by 11 points to 24,823.
Overall market trends remained positive. On the Bombay Stock Exchange (BSE), 2,061 shares advanced, 1,878 declined, and 109 remained unchanged.
Foreign Institutional Investors (FIIs) purchased equities worth Rs 1,371 crore on August 22, and Domestic Institutional Investors (DIIs) acquired equities worth Rs 2,971 crore on the same day.
Looking ahead, speculation continues regarding a possible rate cut at the upcoming Federal Open Market Committee (FOMC) meeting scheduled for September 17-18. The US key rate has remained unchanged at the range of 5.25% to 5.50% since the last quarter percentage point increase in July of the previous year.
