Domestic equity market recoups losses; Inflation in India and US drops for the second month

The domestic benchmark indices opened on a sluggish note on Friday despite positive cues indicating receding inflation in India and US. The BSE Sensex opened above 60,000 mark but early in the trade hit the low of 59,628 points meanwhile, Nifty-50 started trading below 17,900 mark and plunged below 17,800 early in the trading session.

As of 1:25 PM, Sensex is trading at 60,295 points, up 337 points or 0.56%, while Nifty is trading close to 18,000 mark at 17,966 points and Nifty Bank is trading well above the 42,000 mark at 42,370 points. All three major indices turned green intra-day and recouped losses.

In December 2022, the CPI inflation in India dropped to 5.72% as against 5.88% in November 2022. The inflation rate remains slightly under the threshold of RBI’s upper tolerance band of 6% for the second month which is may indicate RBI that the monetary tightening done in the last year is working to tame inflation.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “CPI inflation at 5.72% in December confirms the downtrend which started in November. This will enable the RBI to go slow on rate hikes. Along with easing inflation IIP rising to 7.1% in November reinforces the growth rebound story in India. This means India can achieve a 6% GDP growth rate in FY 24 despite the global growth slowdown.”

Commenting on technical outlook of Nifty, Nagaraj Shetti, Technical Research Analyst, HDFC Securities, said, “A small negative candle was formed on the daily chart with lower shadow. We observe two consecutive candles with lower shadows in the last couple of sessions. The formation of triangle type pattern on the daily chart is intact and Nifty was seen holding on the lower end of triangle at 17800 levels, with false downside breakout on Thursday. The market is still struggling to sustain the highs and we observe consistent formation of lower swing highs on the daily chart. The upside recovery in the market from the lows could be a cheering factor for bulls to make a comeback. But, Nifty needs to sustain the pullback rally to call this action as a bullish reversal pattern.”

Wall Street closed higher on Thursday as inflation in US moderated to 6.5% in December 2022 as against 7.1% in November 2022. Dow added 216 points or 0.7% while S&P 500 gained 13 points or 0.34% and Nasdaq closed 69 points or 0.6% higher.

Referring to CPI report, Sandi Bragar, chief client officer at Aspiriant, said, “I think the markets are pleased, but they don’t seem to be overly excited. Any news in the right direction can make the markets happy these days.”