The benchmark S&P BSE Sensex and the National Stock Exchange Nifty began the new financial year 2024-25 by reaching new record highs. Continuing their upward trend for a third consecutive day, the Sensex reached a fresh intraday high of 74,254.2, while the Nifty climbed to 22,528.6, surpassing their previous record highs logged on March 7. However, both indices finished below their March 7 levels.

The Sensex closed at 74,014.5, up 363.2 points, or 0.5 per cent, while the Nifty closed at 22,462, with a gain of 135 points, or 0.6 per cent.

The broader markets outperformed sharply, with the Nifty Smallcap 100 surging 3.3 per cent, and the Nifty Midcap 100 jumping 1.74 per cent.

The latest surge in optimism was driven by slowing US inflation data, which fuelled expectations of rate cuts by the US Federal Reserve (Fed).

Comments by a European Central Bank official suggesting possible rate cuts in Europe ahead of the Fed also boosted risk-on sentiment. Additionally, the expansion of manufacturing activity in China for the first time in six months further bolstered market sentiment.

US personal consumption expenditure (PCE) in February rose 0.3 per cent from the previous month, slightly lower than the 0.4 per cent increase estimated by some analysts. This modest uptick in the Fed’s preferred inflation metric, coupled with a rebound in household spending, has strengthened expectations for rate cuts this year, indicating a potential shift in the country’s monetary policy.

However, analysts cautioned investors that predicting the trajectory of rate cuts is challenging unless the Fed issues a strong statement affirming a softer monetary policy or alters its stance on data dependency.

US Fed Chairman Jerome Powell asserted last week that the US central bank is not in a hurry to cut rates unless inflation is contained.

Meanwhile, China’s official purchasing managers’ index (PMI) rose to 50.8 in March from 49.1 in February. A reading above 50 indicates growth, raising hopes for the country’s economic recovery.

Metal stocks saw increased buying interest following the release of robust PMI data from China. JSW Steel rose 4.8 per cent and emerged as the best-performing Sensex stock, while Tata Steel gained 4.6 per cent.

“In general, global sentiment received a boost from lower-than-expected US PCE data and strong US gross domestic product figures, enhancing prospects for a rate cut. Now, all eyes are on the Reserve Bank of India monetary policy due this Friday, where a status quo is anticipated, but commentary will be closely monitored. The market is likely to maintain its positive momentum, but volatility may persist,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

Moving forward, the trajectory will be determined by the quarterly results of companies in March and key macroeconomic data from India and abroad. Investors will also observe whether the recent correction in small and midcap stocks leads to more capital inflows into largecaps.

“We are now targeting 22,700 on the Nifty, so participants should adopt a buy-the-dip strategy. The participation of the banking sector will continue to be crucial in sustaining the current momentum, while other sectors may offer support on a rotational basis. Traders should maintain a stock-specific approach and focus on stocks demonstrating higher relative strength,” said Ajit Mishra, vice-president of technical research at Religare Broking.

HDFC Bank rose 1.5 per cent and contributed the most to Sensex gains, followed by Larsen & Toubro, which gained 1.6 per cent.

Foreign portfolio investors were net sellers worth Rs 522 crore, while domestic institutions were net buyers amounting to Rs 1,208 crore.

Market breadth was strong, with 3,212 stocks advancing and 698 declining.

First Published: Apr 01 2024 | 9:59 PM IST

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