Sensex hits 84K, Nifty up 1%: Why stock market is rising today

Hopes that the kick start of Fed rate easing cycle could trigger risk-on trade and result in foreign flows into India pushed benchmark indices higher in Friday's trade, with the BSE Sensex breaching the psychological mark of 84,000 and Nifty topping the 25,650 level with ease. 

Data released overnight showed the US jobless claims hit the lowest point since May and hinted at a strong labour market, brushing off concerns related to slowdown in the US market. The S&P500 index and Dow Jones Industrial Averages soared up to 1.7 per cent overnight. In Asia, markets in Hong Kong, Japan and Korea also jumped.  Domestic stocks moved in tandem with the global rally.  

Sensex soared 1,017.63 points, or 1.22 per cent, to 84,202.43. It hit a record high of 84,240.50 today. Thirty of 30 index stocks were trading in the black. Nifty was trading 250.75 points, or 0.99 per cent, higher at 25,666.55. It hit a high of record high of 25,692.70.

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said: "The Dow and S&P 500 setting yet another record highs overnight is indicative of the strength of this ongoing global bull run, led by the mother market US. The good labour market data from the US indicates that the labour market is only slowing, not deteriorating. With inflation under control, this means the US is set for a soft landing under a declining interest rate scenario. This is positive for global equity markets," said  V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Mahindra & Mahindra gained 4.03 per cent to Rs 2,909.30 and was the best Sensex performer. It was followed by JSW Steel, Maruti Suzuki India Ltd, Larsen & Toubro Ltd, Tata Steel Ltd and Power Grid, which rose 2-4 per cent. 

With prospects of rate cuts in US, ICICIdirect expects FPI money returning to emerging markets and believes that India would benefit significantly. This is incrementally positive with already robust domestic liquidity, it said.

Midcap and smallcap indices recovered and so did the PSU pack after a day of steep fall. 

FPI inflows to India are likely to accelerate if the Fed easing cycle triggers a risk-on rally in the US, Emkay Global said in its latest strategy note. This foreign flows may create enough momentum to protect against downsides, even if valuations cap the upside for the broader stock market, the brokerage added.

The domestic brokerage said FPIs have largely missed the bus so far, but they are now willing to look through elevated valuations and increase their India exposure. Data available with NSDL suggests FPIs bought Rs 33,281 worth stocks in September so far. 

"FPI net inflows in India for 2024 stand at Rs 42,300 crore (0.2 per cent of the Nifty m-cap) compared with the Rs 1.7 lakh crore (1.2 per cent of the Nifty m-cap) in 2023, indicating that there is room for acceleration going forward," the brokerage said.

ICICIdirect said September has seasonality that favours buying dips. Historically, September has been a volatile month with an average of 3 per cent decline, which has provided buying opportunity in the past, as the three-month forward returns for the benchamark indices have been around 7 per cent with 78 per cent probability, ICICIdirect said.