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The Indian stock market opened higher on Friday, following positive cues from global peers, as U.S. economic data alleviated recession fears in the world’s largest economy.
Why BSE Sensex, Nifty50 are rallying today
Several factors contributed to the rally, including cooling U.S. inflation, positive sentiment from U.S. markets, a decline in the dollar index, investors capitalizing on recent declines, Q1 results in line with expectations, and buying in IT stocks. The latest U.S. consumer price data, released earlier on Wednesday, showed that consumer prices rose moderately in July, with the annual inflation rate slowing to below 3% for the first time since early 2021.
Wall Street’s main indices closed higher on Thursday, with the Nasdaq rising more than 2% after July U.S. retail sales data signaled resilient consumer spending. The dollar index declined below the 103 level, making emerging market assets more attractive to foreign investors. Investors also took advantage of recent declines in the Nifty and Sensex, which fell over 2.5% in August.
The just-concluded Q1 earning season was in line with street expectations, with net income for Nifty growing by 5.2%. According to Kotak Institutional Equities, “The positive surprises came from BPCL, COAL and ONGC. The Q1FY25 EBITDA of the Nifty-50 Index grew 3.2% versus our expectation of 0.6% growth. However, earnings are less relevant in the current sentiment-laden market, with the market rewarding modest beats in certain cases (IT service, as an example) and ignoring large misses (APNT and JSTL being two prominent cases) in 1QFY25.”
Indian IT stocks also surged, with the Nifty IT Index rising 1.7%, led by gains in Mphasis, LTTS, Wipro, and TCS. The positive sentiment in the U.S. market, driven by favorable economic data, benefited Indian IT companies, which derive a significant portion of their revenue from the U.S.
