Nifty path to 10K clear: Cooling inflation paves way for rate cut

Mumbai: Continuing their recordsetting spree, benchmark indices ended in the green for the third consecutive session on Wednesday with the Nifty ending above the 9800mark for the first time ever.

The BSE Sensex ended up 57.73 points or 0.2% at 31804.82 after hitting a record high of 31865.69 during the session. Nifty ended up 30 points or 0.3% at 9816.10 after testing a lifetime high of 9824.95 during the day .

On Wednesday, foreign portfolio investors (FPIs) bought shares worth Rs 361.2 crore and domestic institutional investors sold shares worth Rs 330.6 crore.

Indian equities have gained about 1.5% in the current week led by short covering after market regulator Sebi put in place restrictions on FPIs from issuing participatory notes where the underlying asset is a derivative.

Market participants expect more gains as data released after market hours on Wednesday showed retail inflation cooled to 1.54% in June from 2.1% in May . A separate set of data showed industrial growth at 1.7% in May compared to 2.7% in April. Besides the economic data, Yellen's statement to the US Congress will also dictate trend on Thursday as her comments will be watched for cues on future rate hikes by the US central bank.

“It was a foregone conclusion that the (CPI) data will breach 2%. RBI will have a tough time justifying not cutting rates,“ said Sachchidanand Shukla, chief economist, Mahindra & Mahindra Group.

Nifty options data is pointing towards the index hitting 10000 in the near term as the strike has the highest concentration among call options.

However, some market participants said that they don't expect the market to rise significantly and that the gains in the last few trading sessions have been due to short covering and not due to any fundamental trigger.

“I see more risk than reward in the market at current levels,“ said Piyush Garg, CIO, ICICI Securities.