Markets close week on a high note

Mumbai, Aug 16: The stock markets witnessed a strong rally on Friday, with both the NSE Nifty 50 and the BSE Sensex posting significant gains.

The Nifty 50 surged by 397.40 points, or 1.65 per cent, to close at 24,541.15, while the Sensex jumped 1,330.96 points, or 1.68 per cent, ending the day at 80,436.85.

Major contributors to this rally included banking giants ICICI Bank and HDFC Bank, which together accounted for nearly 25 per cent of the day's total gains. Additionally, tech heavyweights such as TCS, Infosys, and Reliance Industries saw gains between 1-2 per cent, further driving the upward momentum.

Among the top gainers on the Nifty 50 were Wipro, Tech Mahindra, Grasim, Tata Motors, and Mahindra & Mahindra, which all posted solid gains.

However, not all stocks shared in the positive sentiment. Divis Laboratories, Dr. Reddy's Laboratories, and SBI Life Insurance were among the laggards of the day, witnessing declines amid otherwise bullish trading.

Sectorally, the IT sector led the charge, with the Nifty IT index rising by 1.64 per cent, buoyed by strong performances from Wipro and Tech Mahindra.

The Realty sector followed closely behind, posting gains of 1.58 per cent. Broader market indices also performed well, with the BSE MidCap and SmallCap indices both rising by more than 1 per cent, reflecting widespread positive sentiment across various sectors.

The Indian rupee faced some pressure, maintaining a slight negative bias against a strong US dollar due to geopolitical tensions between Israel and Iran. However, supportive global market trends helped stabilize the rupee to some extent, despite ongoing uncertainty in the geopolitical landscape.

Global markets provided a boost to investor sentiment. In the US, recent economic data pointed to a slowdown in inflation, with the CPI dropping to a three-year low of 2.9 per cent. Retail sales in July also exceeded expectations, growing by 1 per cent, which fueled speculation that the US Federal Reserve may cut interest rates by 50 basis points in September. These developments triggered rallies in US markets, with the NASDAQ jumping nearly 2.5 per cent, and both the Dow Jones and S&P 500 rising by around 1.5 per cent.

Asian markets mirrored the positive trend, with Japan's Nikkei climbing 3.6 per cent, Hong Kong's Hang Seng gaining 1.7 per cent, and South Korea's Kospi and Taiwan indices both jumping by 2 per cent. The global rally added to the bullish sentiment in Indian markets, pushing indices higher.

Varun Aggarwal, founder and managing director, Profit Idea, said, "Domestic institutional investors (DIIs) have played a crucial role in driving the recent market rally. In August alone, DIIs have been net buyers, purchasing stocks worth Rs 31,450 crore, contributing to the market's strong performance. However, foreign institutional investors (FIIs) have been net sellers this month, offloading Rs 18,824 crore worth of Indian equities. This follows significant FII purchases during June and July, suggesting some profit-booking amid global uncertainties."

Despite recent market volatility, analysts remain optimistic about the medium to long-term outlook for Indian equities. However, short-term volatility may persist due to concerns over high valuations and geopolitical tensions, particularly with the US potentially heading toward a recession. Even significant interest rate cuts by the Federal Reserve may not be enough to prevent a downturn.

As global and domestic factors continue to evolve, market participants will closely watch the developments in US economic data, the Fed's rate decision, and geopolitical tensions, all of which will influence market sentiment in the short term.