The benchmark indices ended at record highs on Friday after ringing up their biggest single-day gain in a month, as higher than expected gross domestic product (GDP) numbers and the benign US inflation data buoyed sentiment.
The 30-share Sensex rose 1,245 points, or 1.72 per cent, to end the session at 73,745, surpassing its all-time high of 73,328 on January 15.
The Nifty 50 finished at 22,339 with a gain of 356 points or 1.6 per cent. This was the sixth session when the Nifty ended with a new high this year.
This was the 11th session when the Nifty logged a new high this year. It was also the third straight weekly gain for the benchmark indices.
The GDP data released on Thursday showed the economy grew at 8.4 per cent in the December quarter amid robust manufacturing and construction.
Growth in September-December was the highest in six quarters and more than the 6.6 per cent predicted by most economists.
The growth estimate for this financial year was revised to 7.6 per cent from 7.3 per cent.
“The upside bump in GDP can be attributed to a mainly technical factor, that is net indirect taxes, while the internals and trend in GVA were in line with expectations.
As such, we remain constructive on the growth trend given support from domestic demand as reflected in the robust trend in high frequency growth data,” said a note by Morgan Stanley.
Private consumption, which constitutes more than half the GDP, remained weak, growing at 3.5 per cent year-on-year against 2.4 per cent in the previous three-month period.
Muted private consumption has led to speculation that the Reserve Bank of India (RBI) will cut rates before the Fed does.
“Private consumption remains muted. Government expenditure is likely to fall. So GDP will falter. Maybe the RBI could cut rates even before the Fed … This will be positive for banks and that’s why we saw them rally. Lower rates will improve their net interest margins,” said Andrew Holland, chief executive officer of Avendus Capital Alternate Strategies.
The Bank Nifty index outperformed, gaining 2.5 per cent.
“Banks could provide the next leg of growth for the markets. If that happens, foreign investors will look to increase their allocations towards the banking stocks,” added Holland.
The US inflation data, which was in line with expectations, enthused investors. The personal consumption expenditures price index for January rose 0.4 per cent from December, and from a year ago, it rose 2.8 per cent. Analysts said the US inflation data came as a relief for those who were expecting the worst.
Meanwhile, Federal Reserve Bank of San Francisco President Mary Daly said there was no urgent need for cuts, given the economy’s strength.
The Cleveland Fed chief said the latest inflation figure did not change her estimate of three rate cuts this year.
Market experts said Friday’s gains would be difficult to sustain.
“The gains are more one-off due to the favourable news flow. The markets are unlikely to sustain this and may return to consolidating or gradually correcting. I don’t think there is enough steam for a rally to sustain from here,” said U R Bhat, co-founder of Alphaniti Fintech.
Market breadth was favourable, with 2,366 stocks advancing and 1,489 declining. Barring four, all Sensex stocks gained.
ICICI Bank, which rose 3.2 per cent, was the biggest contributor to Sensex gains, followed by HDFC Bank, which rose 2.02 per cent.
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First Published: Mar 01 2024 | 11:31 PM IST
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