Equity benchmarks started off strong on Thursday, joining a broad rally in global equities after US inflation data turned out to be less hot than previously feared and pushed the Federal Reserve to raise interest rates less aggressively.
The 30-stock BSE index rose 562.63 points, or 0.96%, to 59,379.92 and the broader NSE Nifty gained 147.05 points, or 0.84%, to 17,681.80.
On Wednesday, markets were range-bound for most of the session as investors kept interest rates low due to weak global signals and ahead of the US inflation report.
In contrast to June, when inflation rose 1.3% monthly, consumer prices in the US were flat in July. Due to the sharp drop in fuel prices, July’s results fell short of expectations, prompting the market to regain confidence that inflation had peaked.
Investors predict that if the price increase peaks, the US Fed will not need to continue raising interest rates at such a breakneck pace.
Wall Street stocks rallied as traders priced the Fed to raise rates by 50 basis points next month, compared with a 75 bps increase that was predicted prior to the inflation report.
Both the S&P 500 and Nasdaq futures were up more than 0.3% on Wednesday. The S&P 500 was up more than 2% in the previous session while the Nasdaq Composite closed 20% higher from its recent closing low in June.
The pan-European STOXX 600 index closed up 0.89% and the MSCI gauge of stocks globally gained 1.80%.
That sentiment extends to early trading in Asia on Thursday.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.0%, helped by a gain of 1.2% in resource-heavy Australia, a gain of 1.4% in South Korea and a gain of 1. .2% in Hong Kong.
The rise of Chinese stocks fell more. Blue-chips rose just 0.5% as new COVID-19 lockdowns in many Chinese cities, including the eastern export hub Yiwu, dampened sentiment.
“Rising real yields, due to the Fed’s pledge to fight inflation, is a big deal for valuations in 2022, so any dovishness is welcome by the stock market, especially for the highest value companies considered positive”, Oliver Blackbourn, multi-asset. portfolio manager at Janus Henderson Investors, told Reuters.