Indian benchmark indices kicked off Monday's session on a strong note, with both BSE Sensex and Nifty50 index opening higher. Market participants believe that headline indices may scale to new highs in the coming days, thanks to positive domestic and global cues. However, there are a few risks including Middle East concerns that may dent the sentiments.
BSE Sensex kicked-off Monday's trading session at 81,388.26, rising 302.05 points, or 0.37 per cent higher, while NSE's Nifty50 opened 82.95 points, or 0.33 per cent higher at 24906.10. Broader markets also rose half-to-two-third a per cent at open. India VIX dropped nearly 6 per cent to 12.77-mark. Here are the top factors that may push headline indices higher:
Rate cut cues US Federal Reserve Chair Jerome Powell comments nearly confirmed a September rate cut, spurring a further drop in the dollar. Powell, at Fed's Jackson Hole symposium said that the time had come for policy to adjust, reinforcing expectations that the Fed will cut rates at the next month's meeting.
Markets are buoyed after Jerome Powell's dovish speech at Jackson Hole, where he hinted at a potential rate cut in September, said Prashanth Tapse, Senior VP (Research) at Mehta Equities. "This has reignited investor optimism, with markets eyeing either a 25 or 50 basis point reduction. The Fed's decision will hinge on upcoming inflation and employment reports," he said.
Buying in the global markets Asian shares crept cautiously higher on Monday amid the rate cut hopes. Investors are also anxiously awaiting earnings from AI darling Nvidia later this week to see if it can match the market's uber-high expectations. MSCI's broadest index of Asia-Pacific shares outside Japan added 0.8 per cent. On Monday, S&P 500 futures and Nasdaq futures were steady. Powell's comments hints that the US central bank will start reducing policy rates from September onwards, said Viram Shah, CEO at Vested Finance. "Equity markets generally benefit from rate cuts as lower interest rates will spur spending and give a boost to the economy. The US market has already bounced higher, and others may follow suit," he said.
Fall in Dollar index, bond yields The dollar and bond yields were on the wane ahead of inflation data that investors hope will pave the way for rate cuts in the United States and Europe. The dollar index languished at 100.64, just off the 13-month low of 100.60 reached at the end of last week. The Indian rupee is expected to rise on Monday.
Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities said that the rupee is expected to remain in a range-bound session between 83.75 and 84.00, with traders likely staying cautious given the current dynamics.
FII's Buying Both domestic and foreign investors remained buyers of Indian Equities on Friday. FIIs bought local shares worth Rs 1,944.48 crore, while the domestic funds pumped in Rs 2,896.02 crore in the previous trading session. However, overseas investors have pulled out Rs 16,305 crore from Indian equities so far.
The US dollar index fell to near a nine-month low, while the 10-year bond yield approached near 14-month low, said Palka Arora Chopra, Director at Master Capital Services. "In terms of market participation, domestic institutional investors (DIIs) maintained their buying momentum, acquiring Rs 13,020.29 crore in the cash segment," she said.
Technical charts Nifty50 has closed flat in a doji candle and sustenance above 24,800 levels confirm a strong breakout on the higher side to scale a new all-time high. On the downside the support has moved higher to 24,500-24580 levels which is the last week low and highest put OI strike in the monthly expiry, said Vikas Jain, Head of Research at Reliance Securities.
"RSI is trending above the average line and other key technical indicators are piercing to the higher band of scale. Highest call OI is at 25,200 strikes while the downside the highest put OI moved higher to 24,600 for the monthly expiry," he added.
Risks The geopolitical concerns in the Middle East continue to weigh on the markets. Hezbollah launched hundreds of rockets and drones at Israel early on Sunday, as Israel's military said it struck Lebanon with around 100 jets to thwart a larger attack, in one of the biggest clashes in more than 10 months of border warfare.
Oil prices climbed 0.8 per cent after Israel and Hezabollah traded rocket salvos and air strikes on Sunday, stirring worries about possible supply disruptions if the conflict escalated. Brent rose 55 cents to $79.57 a barrel, while US crude added 56 cents to $75.39 per barrel.
Crude oil exhibited significant price volatility, extending its gains after the US Fed signalled potential rate cuts in his speech at the Jackson Hole Symposium on Friday, said Rahul Kalantri, VP Commodities, Mehta Equities. "We anticipate that crude oil prices will remain volatile in today's session. For crude oil, support levels are at $72.40-$71.80, with resistance at $73.60-$74.50," he said.