Domestic equity markets fell for the third consecutive week as key benchmark indices BSE Sensex and Nifty 50 fell 0.19% and 0.44%, respectively. The mid-cap segment closed the week in red, however, the small-cap segment closed the week in green.
Domestic equity markets fell as sentiment took hit following the hotter-than-expected domestic retail inflation print of Sep 2024. Government data showed that India’s CPI inflation rose to a nine-month high of 5.49% in Sep 2024 on the back of rising food prices, which dampened hopes of a rate cut by the RBI.
Among sectoral indices, the banking and financial services sector showed strength. The NIFTY BANK index surged by 1.8%, led by positive earnings and optimism surrounding policy reforms that could benefit banks. The NIFTY FINANCIAL SERVICES index also rose by 1.38%, driven by continued growth in major financial institutions. Private banks performed well, with the NIFTY PRIVATE BANK index increasing by 1.33%.
On the other hand, the NIFTY AUTO index saw a significant decline of 4.88%. The automotive sector has faced pressure from weak demand and rising input costs, contributing to its steep fall. Similarly, NIFTY METAL dropped by 1.8%, reflecting concerns over global commodity prices and reduced demand. NIFTY MEDIA declined by 1.69%, mirroring a downturn in the media and entertainment sector.
In the US, all major indices saw positive movements. The S&P 500 rose by 0.5%, the Dow Jones increased by 0.9%, and the NASDAQ edged up by 0.2%. These gains can be attributed to strong corporate earnings and the Federal Reserve’s decision to maintain current interest rates, which has improved investor confidence. The tech sector in particular saw renewed interest, helping to push indices higher.
Bond yields increased tracking a rise in U.S. Treasury yields after U.S. retail sales rose sequentially in Sep 2024, dampening expectations of an aggressive interest rate cut by the U.S. Federal Reserve. Comments by the RBI governor that a rate cut at this point would be “very premature” further weighed on sentiment. However, a decline in global crude oil prices due to a weaker demand outlook outweighed negative sentiment caused by higher-than-expected domestic retail inflation data of Sep 2024 which accelerated to 5.49% YoY, compared to 3.65% in Aug 2024.
The consumer price index-based inflation surged to 5.49% YoY in Sep 2024 compared to 3.65% in Aug 2024. It was the highest inflation rate since the start of the year, overshooting the RBI’s target of 4% after dropping below the threshold in the first two months of Q2FY25. The increase in inflation is attributed to the ongoing rise in vegetable prices.
India’s wholesale price index (WPI) based inflation increased by 1.84% YoY in Sep 2024 as compared to 1.31% in Aug 2024. The positive rate of inflation in Sep 2024 was primarily due to increase in prices of food articles, food products, other manufacturing, manufacture of motor vehicles, trailers & semi-trailers, manufacture of machinery & equipment, etc.
According to the data released by the Central Board of Direct Taxes, the number of taxpayers in the assessment year 2023-24 was at 10.4 crore, up from 5.7 crore in 2014-15, representing a rise of 82%.
Gold surged past the $2,700 mark for the first time, reaching a historic high of $2,722. Prices gained 2.4% last week, bolstered by strong global demand for safe-haven assets and anticipation of further rate cuts from major central banks. The European Central Bank lowered interest rates for the third time this year, cutting the deposit rate to 3.25%, which was widely expected. The metal also found additional support amid escalating tensions in the Middle East.
Silver followed gold’s lead, rising over 6% last week and marking its largest daily gain of 6.5% last Friday—the highest since May 17, 2024. The metal hit a 12-year high, closing above $33 for the first time since November 2012, signaling renewed investor optimism.
Best Regards,
Alpha Research Team
Disclaimer
The above views are our expectations of the economy, market and investments. The views may or may not play out accordingly. You are requested to do your own due diligence before making any investment
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