This week the markets are likely to continue their positive momentum as it is light on the economic calendar front and the mood is vibrant ahead of Christmas celebrations. On the data front, United States & Britain GDP, Europe & Britain inflation and Bank of Japan interest rate decision will be important events to track.
Domestic markets continued their dream runs for the seventh week in a row, celebrating the Fed’s dovish stance last week. Nifty touched yet another new all-time high of 21,492 as sentiments got further uplifted following positive developments both on the global and domestic front.
Nifty witnessed a rally of 487 points (+2.3%) to close at new high of 21,456 levels. The broader market too surged with Nifty Midcap100 and Nifty Smallcap100 up 2.7% and 3.3% respectively. All sectors ended in green with IT rallying the most – up 7.2%. Metals and PSU banks too surged more than 5%, while realty, energy and infra gained 2-4%.
Global markets cheered the US Fed’s dovish commentary where it kept interest rates unchanged in line with expectations and hinted at three rate cuts next year. This led to US bond yields falling to a five-month low, while Indian 10-year bond yields fell to 1-month low of 7.06%. The dollar index too cooled off to 102 levels leading to rally in IT stocks globally.
On the domestic front, lower than expected retail inflation of 5.6% and 16-month high industrial output growth of 11.7% provided further boost to the overall optimism in the market. Power stocks saw strong buzz after electricity generation rose by 20.4% in October while mining output growth of 13% led to rally in mining stocks. Fertilizer stocks too recorded smart gains on expectation of additional subsidy from government for FY24. IPO market remains buzzing with 10 companies already raising funds in December so far following fundraising by eight companies last month.
Thus favourable macro environment, buying by FIIs, fall in bond yields and lower crude oil prices is helping the market to scale new highs. In fact, India last week overtook Hong Kong stock exchange to become world’s seventh largest stock exchange. Going ahead, the positive momentum is likely to continue in the market. Growth stocks will be in focus, with expectations of rate cuts globally in 2024. Some of the sectors that are likely to benefit from lower interest rates are Banking, IT, Auto, and Real Estate.
(The author is head of Retail Research, Motilal Oswal Financial Services Limited)
(Published 17 December 2023, 23:21 IST)