Equity markets, rupee bounce back on global cues

Best single-day gains for US tech stocks in nearly a year on Thursday triggered a global stock market rally that pushed India’s benchmark indices to a 52-week high. The Nasdaq index rose 7.5 per cent in one day on the back of softer-than-expected inflation and jobs growth data.

Sensex and Nifty on Friday surpassed their September month highs and closed within the striking distance of their all-time high levels of 2021. Sensex gained 1.95 per cent or 1,181 points to close at 61,795 and Nifty rose 1.78 per cent or 321 points to close at 18,349.

Money market

The rupee, too, posted its biggest single day and weekly gain in almost four years on expectations that the US Fed may go for smaller rate hikes going forward. INR appreciated 101 paise (or about 1.24 per cent) to close at 80.7950 per dollar against the previous close of 81.8075. It strengthened by about 165 paise (or about 2 per cent) week-on-week.

Intraday, the rupee hit a high of 80.59 and a low of 80.99 per dollar. The last time the rupee gained over 100 paise in a single day was in December 2018, when it was up 110 paise (or about 1.55 per cent). Then it had strengthened 175 paise (or about 2.43 per cent) week-on-week.

The dollar index (DXY), after weakening from 110 level to about 108 on Thursday, slipped further to about 107 on Friday, helping all currencies, including the rupee gain ground against the dollar, said a chief forex dealer with a private sector bank.

Meanwhile, the Government Securities (G-Secs) market witnessed a mild rally, tracking fall in US Treasury yields.

Marzban Irani, CIO-Fixed Income, LIC Mutual Fund, said: “Last night, we saw US inflation at 7.70 per cent vs expectations of 8 per cent. After this data, the yields in US declined. This impact was seen in our market today.”

‘Confidence missing’

“Only Sensex and Nifty are rallying. Even on Friday, Nifty midcap and small-cap indices remained flat and are way below their September month high levels. It indicates that confidence is missing in the markets even at these levels,” said Rohit Srivastava, chief strategist and founder, Indiacharts.

The key risk to the markets is aggressive interest rate hikes in the next six months, which could curb cash flow into equities. Anticipation of interest rate hike depends on inflation figures, which in turn depend on move in the global crude oil prices and DXY against a basket of six currencies. Current expectation is that the US Fed would curb aggressive rate hikes since inflation getting impacted by a lag effect of the past interest rate hikes. Still cash flow in Indian equities remains robust as monthly mutual fund inflows via SIPs reached ₹13,000 crore in October.

“Further upside is likely from here and one may expect new all time highs for Nifty above 18,600 levels in the near term. Immediate support is placed at 18,150,” Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

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