Benchmark indices surged on Monday as the US Fed commentary hinted at an interest cut in September.
The Sensex rose 631 points or 0.78 per cent at 81,718, while the Nifty was up 187 points to end above the psychologically crucial 25,000-mark. Cash market volumes on the NSE continued to fall and was down 5.6 per cent compared to the previous day. Broad market indices rose less than the Nifty even as the advance decline ratio remained positive at 1.07:1.
Barring PSU banks, all sectors ended in green with buying seen in Metals, Realty, and Consumer Durables. Metals saw buying interest following a surge in global prices after a fall in the dollar index and China halting approval of new steel-making capacity.
Vinod Nair, Head of Research, Geojit Financial Services, said, “US Fed has signaled a rate cut in September which is reflecting in the decline in US treasury yields and dollar index, which has led to a rally in global markets despite there being no. indication of size of cuts. Indian markets hit a new high led by change in FPI stance to positive from negative along with continued strong DIIs inflows.”
“Valuations in the large cap space is comfortable as Nifty is currently trading at 18.9x 1-year forward EPS, which is nearly at par with 15-year average of 19x. Strong festive demand; rural revival and interest rate cuts will provide support to markets, along with periods of consolidation,” said Vikram Kasat, Head – Advisory, PL Capital – Prabhudas Lilladher.
Rate cut impact
In India, the Reserve Bank of India (RBI) typically adjusts its policy rates in reaction to the Fed’s interest rate moves. Domestic rate cuts will reduce borrowing costs for companies, especially in capital-intensive sectors like real estate, infrastructure, and manufacturing.
“This can stimulate business expansion, increase profitability and drive-up stock prices in these sectors. Lower rates can lead to cheaper loans for consumers, boosting spending on big-ticket items like homes, cars, and consumer durables. This uptick in consumption can positively impact companies in the consumer discretionary sector, further supporting equity markets,” said Nirav Karkera, Head – Research, Fisdom.
Most Asian indices ended in the green on Monday, with Hang Seng gaining over a per cent. The rising tension in West Asia calmed the bullish sentiment sparked by the prospect of imminent Federal Reserve interest-rate cuts, said experts.
The market will now focus on India and US GDP data, derivatives monthly expiry and geopolitical cues. “The short-term trend of Nifty continues to be positive. Having moved above the crucial hurdles around 24,700 and 24,950 levels, the market is now set to zoom into new all-time highs soon. A decisive move above 25K mark could open the upside target of 25,300-25,400 levels in the near term. Immediate support is at 24,850 levels,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.
