Nifty & Sensex Soar After Strong US Sales & CPI Data; Mid-Small Caps Lead the Charge

On August 16, benchmark indices Nifty and Sensex experienced significant gains, spurred by optimism regarding a potential interest rate cut by the US Federal Reserve in the coming month. This sentiment was fueled by stronger-than-expected US inflation data, robust retail sales figures, and a decrease in jobless claims.

By around 9:20 am IST, the Sensex had risen by 631.05 points, or 0.80%, to 79,736.93, while the Nifty climbed 187.30 points, or 0.78%, to 24,331.10. In market breadth, 1049 shares advanced, 783 shares declined, and 2032 shares remained unchanged.

Retail sales in the US saw a 1% increase in July, far exceeding the Dow Jones estimate of a 0.3% rise. Additionally, weekly jobless claims fell during the same period. US consumer prices rebounded by 0.2% in July as anticipated, continuing a trend of easing inflation. The annual growth in consumer prices has significantly slowed from its peak of 9.1% in June 2022, as higher borrowing costs have dampened demand.

According to Prashanth Tapse, Senior Vice President at Mehta Equities, "Nifty is positioned for a potential uptick, with traders likely to adopt a risk-on approach due to strong cues from Wall Street, expectations of a rate cut by the Federal Reserve in September, and strong US retail sales figures, which have alleviated recession concerns."

Hero MotoCorp, an auto giant, was actively traded following its Q1 earnings announcement last week. Analysts have mixed views on the company's growth prospects; some believe that new product launches could drive growth, while others are concerned about declining volume growth. Hero MotoCorp shares saw a modest increase.

After a brief lull, broader markets resumed their upward trend, with both mid-cap and small-cap indices rising by 0.8 and 1.2%, respectively, outperforming the Nifty and the 30-share Sensex. The mid and small-cap indices have comfortably surpassed the Nifty's 12% year-to-date gains.

The India VIX, commonly known as the fear gauge, decreased by 3%, hovering near 15 levels, indicating lower market anxiety.

Among sectors, the Nifty Metal, Auto, and Realty indices saw the most significant gains, each rising by over 1%. Positive movements in stocks like Hindalco, Tata Steel, and Vedanta lifted the sentiment in the Metal index. All sectors recorded gains.

Hardik Matalia, a Research Analyst at Choice Broking, commented, "After a positive opening, Nifty could find support at 24,200, followed by 24,150 and 24,050. On the upside, immediate resistance is expected at 24,350, with further resistance at 24,400 and 24,450." Regarding the Bank Nifty, he added, "Support levels are likely at 49,800, 49,600, and 49,500, while initial resistance may be encountered at 50,200, followed by 50,300 and 50,400."

Hindalco, M&M, ONGC, Tech Mahindra, and Tata Motors emerged as the top gainers on the Nifty, while HDFC Life, Power Grid Corp, Dr. Reddy's, and Sun Pharma were among the main laggards.