Indian Stock Indices Soar to New Heights Amid US Rate Cuts

Indian stock indices reached record highs with Sensex crossing 85,000 and Nifty over 26,000. The boost was attributed to the US Federal Reserve's interest rate cuts, increased foreign investments, and positive sectoral trends. Analysts maintain a bullish outlook despite potential challenges.

Stock indices in India reached new milestones, achieving fresh highs on Wednesday. The Sensex closed above 85,000 and Nifty surpassed 26,000 for the first time. Sensex ended at 85,169.87 points, rising by 255.83 points or 0.30%, while Nifty concluded at 26,004.15 points, gaining 63.75 points or 0.25%. Among sectoral indices, Nifty media was the top performer, climbing 2.94%.

The US Federal Reserve's monetary policy committee has notably lent support to Indian stocks by slashing interest rates by a significant 50 basis points. Such a reduction in US rates often results in capital flight to markets with higher policy rates. The steeper the rate cut, the greater the tendency for capital to move to alternative investment destinations like India.

Foreign portfolio investors have also bolstered stock indices through continued buying. Investors were hopeful for better returns due to interest rate differentials, purchasing Rs 50,913 worth of Indian stocks in September, according to NSDL data. This marks the fourth consecutive month of net buying by foreign portfolio investors.

Ajit Mishra, SVP of Research at Religare Broking Ltd., stated, "We maintain our bullish outlook amid ongoing consolidation and recommend focusing on stock selection aligned with sectoral trends. Besides rate-sensitive sectors, we observe strong momentum in metal and power stocks, while the current correction in IT presents a buying opportunity. Traders should plan their positions accordingly." Factors such as firm growth, manageable inflation, political stability, and indications that the central bank has concluded its monetary tightening have painted a positive picture for Indian stocks.

So far in 2024, Sensex and Nifty have surged 17-20%. However, Vinod Nair, Head of Research at Geojit Financial Services, cautioned, "The domestic market may face short-term challenges due to a decline in FII inflows and the shift of funds to other emerging markets due to their cheaper valuations."

(With inputs from agencies.)