The BSE Sensex advanced by 249 points or 0.3%, reaching 81,772 in early trading on Thursday, bouncing back from losses seen in the previous session. The gains were fueled by a tech-driven rally on Wall Street that followed the release of favorable US inflation data. The US inflation report for August 2024 showed inflation had cooled to its lowest level since February 2021, providing a boost to global markets.

Investors are now turning their attention to next week's Federal Reserve monetary policy meeting, where the expectation is that the Fed will opt for a smaller rate cut given the positive inflation data. Domestically, Indian traders are also awaiting the release of August inflation data later today, with analysts predicting a figure of 3.55%, little changed from the five-year low of 3.54% recorded in July. If inflation remains benign, it increases the likelihood that the RBI will consider rate cuts by the end of 2024, further supporting market sentiment.

The Nifty 50 index also climbed, gaining 0.4% to rise above the 25,000 mark. The rally was broad-based, with foreign inflows and all sectors trading in the green. Leading the pack was the Nifty Healthcare index, followed closely by gains in consumer durables, pharmaceuticals, auto, and metals sectors.

Top Gainers

Among individual stocks, some of the standout performers included Bajaj Auto, which surged 2.4%, and Adani Ports, rising 2.1%. Both companies have been benefiting from strong fundamentals and increasing foreign investor interest. Meanwhile, Kotak Bank and Shriram Finance posted gains of 1.7% each, buoyed by expectations of monetary easing from the RBI. In the technology sector, Wipro rose by 1.4%, reflecting the continued strength of tech stocks following the global tech rally sparked by US market gains.

The rally in Indian markets mirrors broader global trends, particularly in tech-heavy sectors. In the US, semiconductor companies such as Nvidia, AMD, and Broadcom led gains on Wednesday as investors bet that cooling inflation would allow the Federal Reserve to pursue a more dovish stance. The Nasdaq Composite surged by 2.17%, while the S&P 500 gained 1.07% and the Dow Jones rose 0.31%.

Inflation Data in Focus

The Indian inflation data due later today is expected to play a critical role in shaping the RBI’s policy outlook. With inflation sitting at multi-year lows, analysts are predicting that the Reserve Bank of India could introduce rate cuts to stimulate growth, especially as global inflationary pressures appear to be easing. A stable inflation figure for August 2024 could further solidify the case for a monetary easing cycle, which would be welcomed by the market.

As the Indian economy continues to grapple with global economic uncertainties, traders and investors alike will be closely watching for signs of policy direction from the RBI. In addition, foreign investors are likely to continue funneling money into Indian equities, especially if inflation remains subdued and the RBI signals a potential shift towards looser monetary policy.

Outlook and Investor Sentiment

The Indian stock market continues to demonstrate resilience in the face of both global and domestic uncertainties. With foreign inflows remaining strong and key sectors such as healthcare, pharma, and tech leading gains, the broader outlook remains positive.

However, the performance of the BSE Sensex and Nifty 50 will depend heavily on macroeconomic data, including inflation figures and the RBI's policy stance. Should inflation remain subdued, the likelihood of interest rate cuts could boost market sentiment further, particularly in rate-sensitive sectors such as financial services and consumer goods.

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