Benchmark indices extended their recovery rally for the second session in a row on December 22 amid positive global cues, led by gains in IT stocks and index heavyweights.
Sensex jumped 638.12 points, or 0.75 per cent, to close at 85,567.48, while Nifty 50 climbed 206 points, or 0.79 per cent, to end the session at 26,172.40.
The overall positive sentiment was mirrored in broader market indices as well. Nifty Midcap 100 closed 0.84 per cent higher, Nifty Smallcap 100 settled 1.17 per cent up, while Nifty 500, which represents more than 92 per cent of the total free-float market cap of all NSE-listed stocks, gained 0.80 per cent.
The rally came amid increased expectations of a rate cut by the US Federal Reserve, as a softer US inflation, which eased to 2.7 per cent year-on-year, strengthened expectations of additional rate cuts next year.
The Chicago Mercantile Exchange’s (CME) Fed Watch Tool suggests a 22.10 per cent probability of a 25 basis point (bps) rate cut by the US Federal Reserve in January next year, while the likelihood of maintaining a status quo is 77.90 per cent.
By March, the expectations of a cumulative 25 bps rate cut increased to 45 per cent. However, markets also see a 45.90 per cent probability of rates remaining unchanged and a 9.1 per cent chance of a cumulative 50 bps cut.
IT, Metal Lead Gains
Among sectoral indices, barring consumer durables, all other Nifty sectoral indices closed in the positive territory.
Leading the gain was Nifty IT, which rose 1.06 per cent. Indian IT stocks usually gain when expectations of US Fed rate cuts rise because the sector is tightly linked to US demand and global risk sentiment. Lower rates improve the outlook for US economic growth, encouraging American clients to step up technology spending and revive deal activity, which directly benefits Indian IT exporters.
Rate-cut expectations also lower bond yields and improve valuations for growth stocks like IT. At the same time, reduced fears of a US slowdown ease concerns over budget cuts, deal delays and pricing pressure, prompting investors to turn positive on the sector.
Nifty Metal rose 1.41 per cent, led by gains in National Aluminium, which rose 4.31 per cent. A rally in the aluminium producer’s shares came after its management shared their expectation on pricing, demand and margins of aluminium. Management expects the aluminium market to remain in a deficit, which should continue to support prices, even as alumina is likely to slip into a surplus with new capacities coming on stream.
Hindustan Zinc rose 2.73 per cent, as a proxy play for rising silver prices. Silver futures on MCX rallied nearly 3 per cent to touch a new record high of Rs 2,14,583 per 1 kg. Hindustan Zinc is the only listed silver producer on domestic exchanges. The Vedanta subsidiary is primarily a zinc-lead producer that also produces silver as a by-product.
Among other indices, Nifty Auto surged 0.82 per cent, Nifty Pharma climbed 0.78 per cent, Nifty Healthcare advanced 0.77 per cent, Nifty Oil & Gas gained 0.75 per cent, and Nifty FMCG ended 0.51 per cent higher. Nifty Realty, however, closed flat-to-positive, up just 0.03 per cent. Nifty Chemicals was also among the major gainers, rising 1.42 per cent.
Nifty 50: Top Gainers & Losers
Among the Nifty 50 index constituents, Trent zoomed 3.86 per cent, Shriram Finance advanced 3.67 per cent, and Wipro rallied 3.10 per cent. Infosys, Bharti Airtel, Tech Mahindra, Tata Motors Passenger vehicles, Bajaj Auto, Maruti Suzuki India, Sun Pharma and Bharat Electronics also rose in the range of 1.50 per cent to 3 per cent.
Among the stocks that contributed to capping the gains in the 50-share benchmark index were HDFC Life Insurance, Tata Consumer Products, State Bank of India, and Kotak Mahindra Bank, falling between 0.51 per cent and 0.71 per cent. Grasim Industries, InterGlobe Aviation and SBI Life Insurance were other losers of the day.
Stock Market Outlook: What To Watch Next When Trade Resumes On Dec 23
Market participants are likely to react to the developments around India’s recent trade deal with New Zealand and signs of progress in India-US trade negotiations.
India and the United States are in the advanced stages of negotiating a bilateral trade agreement, Union Minister of Commerce and Industry Piyush Goyal said earlier today.
“We are already at an advanced stage in our discussions with the US,” Goyal told reporters on the sidelines of an event to announce the conclusion of negotiations for the India–New Zealand free trade agreement (FTA).
The India-New Zealand FTA is likely to be signed in three months, and it is expected to be implemented next year, said India's trade secretary Rajesh Agrawal.
Focus is also likely to remain on the ongoing conflict between the US and Venezuela. In a latest development, the US is reportedly chasing a third oil tanker in international waters near Venezuela as part of its enforcement actions against what it calls illegal sanctions evasion.
The US Bureau of Economic Analysis is scheduled to release gross domestic product (GDP) growth data for the country’s September quarter on December 23. Any surprise in the numbers could spark volatility in bond yields and the dollar, which could impact emerging markets, including India.
The focus will also likely remain on rupee and dollar movements amid expectations of a US Fed rate cut and foreign institutional investor (FII) flows. Market participants are also likely to track fluctuations in crude oil prices amid US-Venezuela tensions and the Russia-Ukraine conflict.
