The share market had opened higher, and extended rally in the afternoon trade as investors were upbeat with expectations of a rate cut, after CPI inflation came in at an 18-month low, and China signalled stimulus measures to lift the economy. We take a closer look.
The domestic stock markets– Sensex and Nifty– rallied on Tuesday on the back of a confluence of favourable domestic as well as global factors. Sensex ended 464.77 points higher at 36,318.33, while Nifty added 1.39% to 10,886.80. The share market had opened higher, and extended rally in the afternoon trade as investors were upbeat with expectations of a rate cut, after CPI inflation came in at an 18-month low, and China signalled stimulus measures to lift the economy. We take a closer look at three key factors behind the rally.
Cooling inflation lifts sentiment
Investor sentiment got a big fillip after retail inflation dropped to an 18-month low of 2.19% in December, creating headroom for the Reserve Bank to ease monetary policy next month. Another set of official data showed that the wholesale inflation too eased to an eight-month low of 3.80% in December. “Domestic market was buoyed by broad-based buying across all sectors and particularly led by rate sensitive sectors on the expectation of a probable rate cut considering that Index of Industrial Production for the month of November slumped to mere 0.5 per cent while CPI inflation eased for a 6th straight month to 2.19 per cent in December,” Paras Bothra, President, Equity Research, Ashika Group told PTI.
China plans stimulus measures
Asian stocks pulled ahead on Tuesday, led by a bounce in Chinese shares as Beijing signalled more supportive measures to stabilise a slowing economy, setting the tone for investors back home. China’s state planner said on Tuesday it will aim to achieve “a good start” in the first quarter for the economy in a signal of more growth-boosting steps, Reuters reported. State television also quoted Chinese Premier Li Keqiang as saying the government is seeking to establish conditions helpful to meeting this year’s economic goals, added the report.
IT heavyweights rally after Rupee slump; bluechips surge
Information technology heavyweights Infosys and TCS zoomed in trade on Tuesday, helped by a slump in rupee. Infosys share price surged by more than 3.6% to close at Rs 726.55, while TCS shares ended 2.7% higher at 1,864.20. The rupee depreciation is considered to be beneficial for IT companies, as they majorly export their software services and make gains in dollar. Apart from IT majors, Mukesh Ambani-led Reliance Industries and HDFC twins rallied between 1-3%, contributing to about 60% of the Nifty gains.