Benchmark indices rallied on Friday, mirroring gains in global equities, after a series of macroeconomic data from the US allayed fears of a recession. Continued buying support from domestic investors added to the buoyancy.
The benchmark Sensex ended the session at 80,437, with a gain of 1,331 points or 1.7 per cent—the most since June 7. The Nifty 50 index rose 397 points to end the session at 24,541, a gain of 1.6 per cent, marking the best single-day gain since July 26. The market cap of all BSE-listed companies rose by Rs 7 trillion to Rs 451.6 trillion.
Both indices ended the week with gains after posting declines in the previous two weeks.
The Sensex and the Nifty also closed at their highest levels since August 2. During the next trading session on August 5, the domestic markets had crashed nearly 3 per cent amid a global selloff triggered by weak unemployment data in the US and fears of a recession.
Most global markets have since recouped all the losses, as the latest data on jobless claims and retail sales in the US supported hopes that the world’s largest economy is on its path to containing inflation while maintaining healthy economic growth.
Domestic institutional investors (DIIs) on Friday were net buyers to the tune of Rs 2,606 crore, while foreign portfolio investors (FPIs) were net buyers worth Rs 767 crore.
So far in 2024, DIIs have been net buyers of shares worth Rs 2.95 trillion, while FPIs have bought shares worth Rs 16,123 crore.
Data on initial US unemployment benefits applications fell for a second week to the lowest level since early July. Initial applications for unemployment fell by 7,000 to 227,000 for the week ended August 10. Separately, US retail sales rose by the most since early 2023.
The value of purchases, without adjusting for inflation, rose 1 per cent in July due to a revival in car sales. The sales data revealed that demand is increasing despite higher borrowing costs and an uncertain economic outlook. However, the report showed that many US citizens are resorting to loans and credit cards to support their purchases, raising doubts about the sustainability of the demand.
This week’s statement by monetary policy officials further boosted optimism about an imminent rate cut. Atlanta Fed President Raphael Bostic, a voting member of the central bank’s rate-setting committee, indicated on Thursday that he is in favour of rate cuts in September and warned that the Fed cannot be behind the curve when it comes to easing monetary policy.
Meanwhile, Federal Reserve Bank of St Louis President Alberto Musalem said the appropriate time for a rate cut is approaching as inflation is nearing the Fed’s target of 2 per cent.
“Markets are latching onto any bit of positive newsflow that’s out. Now, the expectations of a soft landing are back. Market trajectory will largely depend on global events. In the near term, Jerome Powell’s statement at the Jackson Hole meeting next week will be keenly watched by investors,” said Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies.
The India VIX, a gauge of market volatility, declined 6.7 per cent and was trading at 14.4. For the first time since August 2, 2024, the fear gauge has ended below 15.
The market breadth was positive, with 2,414 stocks advancing and 1,527 declining. US-revenue-dependent IT stocks were among the best performers, with the sectoral gauge rising nearly 3 per cent.
HDFC Bank, which rose 1.5 per cent, was the biggest contributor to Sensex gains, followed by ICICI Bank, which rose 2.2 per cent.
“Investors are advised to remain cautious in the short to medium term. The focus will be on value stocks in sectors like FMCG, IT, pharma, and telecom,” said Vinod Nair, head of research at Geojit Financial Services.
