- India’s Nifty and Sensex witnessed a Tuesday turnaround.
- Nifty and Sensex fell on Monday on a profit-taking spree and cautious global markets.
- Nifty and Sensex traders look forward to the upcoming US and Indian inflation data.
The Sensex 30 and Nifty 50, India’s key benchmark indices, rebounded on Tuesday, snapping a negative start to the week on Monday. Cautious trading on their Asian and European counterparts, however, kept the recovery attempts.
The National Stock Exchange (NSE) Nifty 50 index closed 0.59% higher on the day at 21,743.25. The Bombay Stock Exchange (BSE) Sensex 30 settled Tuesday at 71,555.19, adding 0.68% on a daily basis.
Stock market news
- The rebound in Nifty and Sensex was led by fresh buying in banking, financial services and IT sector stocks.
- Nifty and Sensex also cheered news that Index provider MSCI raised India's weightage in its Global Standard index to an all-time high of 18.2%.
- Coal India, UPL, Axis Bank, ICICI Bank and HDFC Life Insurance Company are among the top gainers on the Nifty on Tuesday.
- Meanwhile, top losers included Hindalco Industries, Grasim Industries, Divi’s Laboratories, Ultratech Cement and Bharat Petroleum Corporation.
- Hindalco Industries on Tuesday reported a 71% YoY growth in its consolidated net profit at Rs 2,331 crore for the quarter ended December 2023. The profit stood at Rs 1,362 crore a year ago.
- Shares of Reliance Industries (RIL) become the first listed Indian entity to cross the Rs 20 lakh crore market capitalization milestone after the stock rallied up to 1.89% to hit a fresh 52-week high of Rs 2957.80 on Sensex.
- Shares of Paytm dipped by over 8.0% after the downgrade.
- India’s Multi Commodity Exchange (MCX) index commences trading after a four-hour delay due to technical glitches.
- The Initial Public Offer (IPO) of Alpex Solar Limited received an overwhelming response from the investors as it recorded 303 times subscriptions till the final day of bidding.
- Rush for profit taking and mixed trends in global markets could be attributed as key factors behind the recent correction in Nifty and Sensex on Monday.
- The Indian markets have extended their lead to the highest ever over Hong Kong when it comes to daily trading volumes. While India’s benchmark Nifty was up 22% in the past year, Hong Kong’s Hang Seng eroded nearly 25%.
- On Monday, India's Consumer Price Index (CPI) Inflation declined to a three-month low of 5.1% in January but remains within the Reserve Bank of India’s (RBI) tolerance band of 4 (+/- 2)% for the fifth straight month.
- Lunar New Year holidays in China and some of the major Asian markets could keep the liquidity thin around the Indian indices. However, traders look forward to Tuesday’s US CPI inflation report and Wednesday’s Wholesale Price Index (WPI) release from India for fresh trading impetus.
- US CPI data is likely to have a significant influence on the US Federal Reserve (Fed) interest rate path, setting the tone for global markets in the coming days.
What is inflation?
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
What is the Consumer Price Index (CPI)?
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
What is the impact of inflation on foreign exchange?
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
How does inflation influence the price of Gold?
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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