US data cheers markets

US data cheers markets

Indian equities surged to a fresh 52-week high on Friday amid positive global cues and a weaker dollar as US consumer prices cooled fuelling hopes that the Federal Reserve would slow the pace of interest rate hikes.

The BSE Sensex closed 1,181.34 (1.95%) points higher at 61,795, its biggest gains since October 4, 2022. The Nifty 50 settled at 18,349, posting a gain of 321.50 points (1.78%). The Nifty Bank index ended at a record high of 42,187.

In the US, CPI inflation at 7.7% for the year-ended October was lower than the figure of 8.2% last month and market expectation of 7.9%. The Dow Jones rose 3.7% on Thursday, while the Nasdaq Composite was up 7.3%.

Also Read: India, US express concern over inflation caused by external factors

“This has reduced the recession probability from 60% to 40% and has brought down the expectation of a peak benchmark rate from 5.25% to 5%. This is the first spark of good news from the US in a long time and has been instrumental in lifting investor sentiments,” said Sushant Bhansali, CEO, Ambit Asset Management.

Bhansali said emerging markets such as India will continue to be driven by the strength of its domestic consumption and the strength of the economy, which will also limit the impact of a global slowdown.

Ratings agency Moody’s, however, slashed India’s GDP growth projections for 2022 to 7% from 7.7% earlier citing global slowdown and rising domestic interest rates.

FPIs have pumped in $2.3 billion in Indian equities in November,paring the year to date outflows to $19.9 billion.

“What has helped the India market is the return of FII inflows, along with resilient earnings in sectors such as financial services, IT services and pharma. India’s weight in emerging market indices has increased. Domestic flows remain healthy. While we continue to find the market expensive relative to its history, regional peers and on the elevated bond yield-earnings yield gap, flows are likely to dominate near-term returns,” said Kunal Vora, head – India equity research, BNP Paribas India.

Most Asian stock markets rallied on Friday, while European stocks and US futures rose. China’s withdrawal of some Covid-related curbs drove outsized gains in local markets. Chinese authorities on Friday shortened quarantine times for residents and inbound travellers, and scrapped a penalty on airlines that bring in infected passengers.

Economic data released Friday showed that UK gross domestic product fell 0.2% in the third quarter from the second, a slightly better outcome than the 0.5% decline feared. This was the first contraction in six quarters.