The Indian stock market surged on Wednesday, with benchmark indices Sensex and Nifty rising nearly 1% each, despite a sharp increase in oil prices as US-Iran tensions escalated.
At 9:49 am Sensex soared above 800 points to trade at 77,550 level, while Nifty gained over 200 points to trade above 24,200 mark. The sharp gains added around Rs 3 lakh crore to the total market capitalisation of all companies listed on BSE, pulling it up to Rs 482 lakh crore.
Infosys, L&T, Eternal, Hindustan Unilever, Bharti Airtel, TCS, Bajaj Finance, M&M, Tech Mahindra, HDFC Bank and HCL Technologies shares were the top gainers on Sensex, jumping up to 3%. Bucking the trend, IndiGo shares fell nearly 1% as oil prices soared over 4% after joint strikes in Iraq by US and Saudi Arabia, and the interception of Iran’s ballistic missiles aimed at US forces in the Middle East spooked investors.
India VIX, which is a measure of volatility in the market, dropped more than 3% to 12.18 despite the renewed uncertainties. Broader markets also traded in deep green, with Nifty Midcap 100 and Nifty Smallcap 100 indices rising up to 0.6%.
Sectorally, Nifty IT and Nifty Metal jumped 1-2% to lead gains, while Nifty Realty and Nifty Oil & Gas slipped into the red. The overall market breadth turned positive, with the NSE seeing 1,894 advances against 641 declines, while 102 stocks remained unchanged.
Here are the 4 key factors pushing the market higher today.
1) Global AI selloff continues
IT stocks including Infosys and HCL Tech are among the top gainers on Dalal Street today. A large part of it may have been driven by India’s resilience to the ongoing global AI selloff. South Korea’s Kospi, consisting heavily of chipmakers, crashed around 9% today while Japan’s Nikkei was down over 4%. Taiwan Weighted, meanwhile, dropped over 4%.
This comes as India comparatively has a smaller number of large listed companies directly tied to the AI infrastructure boom, providing it resilience at a time when analysts are questioning whether the massive AI spending by hyperscalers will actually bear fruit in the future, triggering AI bubble worries.
2) Rupee gains
The rupee rose 12 paise to 95.70 against the US dollar in early trade on Wednesday. The Indian currency has drawn support over the last three sessions from likely intervention by the Reserve Bank of India, which traders expect will continue to underpin the currency.
“Going forward, the rupee will continue to take cues from crude oil prices, the US Dollar Index, FII flows, and the upcoming US Federal Reserve policy decision. Technically, the rupee is expected to trade in the 95.50-96.25 range in the near term,” said Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities.
3) FII buying
Foreign institutional investors remained net buyers of Indian equities on Tuesday, purchasing shares worth Rs 755 crore, according to provisional data from the NSE. This comes after FIIs heavily sold shares on Dalal Street over the past four sessions.
While this is marginal compared to the previous selloff and does not reflect their activity today, net buying by FIIs often boosts market optimism.
4) Fed likely to keep rates unchanged
The US Federal Reserve is set to announce the outcome of its FOMC meeting today. Markets largely expect the American central bank to keep interest rates unchanged, though the outlook remains clouded by persistent inflation concerns among a growing number of Fed policymakers.
The Fed’s decision will be a crucial indicator against the backdrop of rising inflation worries amid the escalating conflict in the Middle East.
What lies ahead?
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, expects the previous range-bound construct of the market to be broken on the upside, assisted by fairly valued stocks in the Nifty. “This might take time. Big conviction buys by FIIs need clarity on the trajectory of crude prices and the progress of the monsoon. The sharp correction in chip stocks in South Korea is an advantage for India,” he said.
The Fed decision on rates tonight will be keenly watched by the market, according to the analyst, who added that although inflation is a concern in the US, the Fed is likely to hold rates now and move to a rate hike in the next meeting. “However, if the Fed goes for a surprise early hike, that will have slightly negative implications for Indian markets. Rising yields in the US will drive FIIs to US bonds, away from EM equities,” he warned.
Technical view on Nifty
While Nifty’s turn lower from the 10-day SMA evolved on anticipated lines, the key pivot of 23,891 stepped in to arrest declines, keeping upside hopes alive, Anand James, Chief Market Strategist at Geojit Financial Services, said while explaining the technical charts.
He, however, noted that it would require consistent trades above 24,100 or a direct rise above 24,220 to act as further signals of upside continuation.
(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
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