Reduced US inflation and a regular monsoon prediction boost Indian equities, with the IT index rising to the top

May 16, New Delhi, India: The opening bell on Thursday saw a robust start for stock indexes, after solid overnight indications from US markets that surged following softer-than-expected US consumer inflation in April.

The CPI grew 3.4% in the 12 months ending in April, after a 3.5% gain in March. The slowdown in inflation probably increased forecasts for earlier US interest rate reductions in 2024.

Investor mood this morning was further bolstered by the Southwest Monsoon’s earlier-than-usual arrival, as forecast by IMD. This monsoon is expected to provide relief to farmers after last year’s below-average rainfall. Kerala is expected to experience the southwest monsoon on May 31, one day ahead of the typical June 1 arrival date.

Rainfall during the monsoon season (June to September) throughout the whole nation in 2023 was 94% of the long-term average.

Sensex was up 390.59 points, or 0.54%, at 73,377.62 points at 9:25 a.m. today, while Nifty was up 116.35 points, or 0.52%, at 22,316.90 points. The remainder was in the green, according to NSE statistics, with the exception of the Nifty pharma and Nifty healthcare index, which were slightly down.

The US inflation rate has moderated, which has improved commercial prospects for Indian IT businesses. This has led to the largest rise in the Nifty.

“The IMD’s prediction of a typical monsoon hitting Kerala by May 31st is a major boost to the favorable domestic elements as well. Financial market specialist Ajay Bagga said, “We anticipate a positive start to Indian stocks today. What remains to be seen is if FIIs will rerate the Indian markets and flows will turn positive.”

Rewinding to Wednesday, Indian benchmark indexes ended the day lower than they had started, breaking a three-day winning run.

The strong US currency, the uncertainty surrounding the result of the Lok Sabha elections after a pattern of declining voter participation so far in the voting stages, and profit booking following the recent surge were cited by experts as the reasons for the indexes’ steady decline during the last week.

For the ninth straight session on Tuesday, foreign investors continued to be net sellers of Indian stocks. But over the last two weeks, local institutional investors have made net purchases, offsetting the withdrawals by foreign investors.

Recently, foreign portfolio investors, or FPIs, have started selling Indian equities on the open market. According to data from National Securities Depository Limited (NSDL), foreign portfolio investors (FPIs), who were net purchasers for the third month till mid-April, sold a total of Rs 8,671 crore worth of equities during the month. They have sold equities for Rs 25,280 crore so far in May.

India’s poor performance might soon improve once the election results are known. Retail, HNIs, and DIIs might become active purchasers and significantly increase the market. FIIs must not pass up this possible rally. Political upheaval after elections looks to be the sole danger, which is now a highly unlikely occurrence, according to V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

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