Markets Rush in Second Day; Sensex Soars by 862 in line with Global Market Rally.

Stocks attract domestic investors because data on eased US inflation and strong international signals improve investor sentiment.

Mumbai, October 16:

On Wednesday, Indian equity markets continued their gains in the second straight session and benchmark indices shot up by a wide margin in line with the international counterparts. The Sensex had increased by 862 points, or 1.15, to 76,438.19, whereas the Nifty50 had increased by 258 points, or 1.13, to close at 23,185.75.

The positive mood among investors was encouraged as the world market increased following the anticipation that large central banks, especially the US Federal Reserve, could start decreasing interest rates earlier than also expected in response to indications of waning inflation in the largest economy globally.

Broad-Based Purchasing Elevates Indexes.

The rally was generalized as all the sectoral indices were in green. The uptrend was led by heavy weights in the banking sector, the IT sector as well as the auto sector. The BSE Bankex, IT Preferred 1.7 and Auto 1.2.

Top contributors of the rally among Sensex constituents included HDFC Bank, Infosys, Reliance Industries, and ICICI Bank that contributed more than 400 points to the index.

This also reflected in mid and small cap stocks, where Midcap index rose by 0.9 percent and Smallcap index increased by 0.8 percent. The breadth of the market was very favorable with almost every two stocks making upwards moves against one that fell at the BSE.

International Signals Are Still Favorable.

The Asian and European stocks were traded higher throughout the day on the basis of optimism based on the prospects of monetary tightening. The Tokyo Nikkei rose by 1.2 percent, Hong Kong Hang Seng market increased by 1.5 percent, and London FTSE market improved by about 1 percent.

The previous US consumer price data was also another aspect that the stock market at Wall Street had previously surged following the news that September saw the inflation for the first time in a long time; it had decreased to 2.9. This reinforced the anticipation that the Federal Reserve could start reducing interest rates as early as in December.

The global risk appetite has increased after lower inflation levels were registered in Europe and the US. This has prompted the inflows of foreign investments to the emerging market such as India, as explained by Vinod Nair, Head of Research at Geojit Financial Services.

Foreign Inflows and Rupee Stability Provide impetus.

The foreign institutional investors (FIIs) became net buyers in the second consecutive session buying equities in the sum of [?]1,342 crore on Tuesday, based on tentative exchange data. The Indian rupee also maintained a steady position in 83.12 against US dollar due to strong inflows as well as weakened greenback.

Analysts mentioned that the long-term FII interest coupled with improved domestic macroeconomic statistics would ensure a market on an upward curve in the short term.

Prognosis: The Volatility Could Continue Before Earnings.

In spite of such optimism, analysts advised that the turbulence can continue in the coming days because the corporate earnings season continues to pick up steam. Markets have already captured good global indicators but the sustainability of this rally will depend on the company level performances and management commentaries, said Deepak Jasani, Head of Retail Research, HDFC Securities.

As several lead companies, such as Infosys, HDFC Bank and Reliance Industries, report quarterly results later in the week, traders will become stock-specific.

Conclusion

The two tail winds of falling world inflation and robust institutional inflows have offered a very welcome respite to investors who have gone through volatile trade in weeks prior. Although the trend looks hopeful, analysts recommend that people should accumulate cautiously due to the financial dangers that are present all over the world and the geopolitical threats.

At present, Indian equities seem to be properly placed to take advantage of a synchronized global recovery, as long as the corporate profits and the stability of company policies sustain the prevailing trend.