US data surprise eases rate hike fears, also cheers D-Street

Mumbai: Indian equities ended higher on Wednesday, tracking a broader rally across Asian markets, after a softer-than-expected US inflation reading fuelled hopes that the Federal Reserve may not need to raise interest rates as sharply as feared.

However, gains remained capped as oil prices hovered around $85 a barrel following a third round of US strikes on Iran, keeping concerns alive over potential supply disruptions through the Strait of Hormuz.

The NSE Nifty rose 26.5 points, or 0.1%, to close at 24,078.50, while the BSE Sensex gained 130.5 points, or 0.2%, to settle at 77,185.43. Both benchmarks had climbed as much as 0.7% during the session before paring gains.


"Though structurally we are positive on the market, the near-term could be somewhat challenging because of the global uncertainties," said Bhavesh Sanghvi, CEO, Growthfiniti Wealth. "The market is unlikely to see large index movements, and activity will be stock or sector-specific."

The Nifty ended above its 20-day exponential moving average (20-DEMA) as well as the key psychological support level of 24,000, said analysts. The India VIX, the market's fear gauge, fell 3.5% to 13.27, suggesting traders' near-term expectations of risks are lower.

Investor sentiment has turned cautious of late, weighed down by the escalating geopolitical tensions in the Middle East. Brent crude futures were up 0.3% at $85 after the US resumed its blockade of Iranian ports. US President Donald Trump, in an interview with Fox News, threatened to strike Iran's power plants next week if Tehran does not return to talks. Market players are, however, not panicking on expectations that the conflict will not escalate.

"Despite fresh escalation between US and Iran, we believe that the peak conflict is behind us and thus do not see commodity prices scaling back to previous highs," said Elara Capital in a note to clients.

Across Asia, markets on Wednesday largely followed Wall Street higher after the benign US inflation data reinforced expectations of a less aggressive monetary policy path. South Korea surged 6.2%, while Taiwan rebounded 2% after the recent sell-off in semiconductor stocks. Hong Kong gained 1.4%, Indonesia ended flat, while China slipped 0.3%.

At home, gains in the broader market too were capped, with the Nifty Midcap 150 advancing 0.4% and Nifty Smallcap 250 rising 0.7%. Market breadth remained mixed, with 2,317 stocks advancing and 1,957 declining out of the 4,442 traded on the BSE.

Foreign portfolio investors sold shares worth ₹736 crore on Wednesday, while domestic institutional investors bought equities worth ₹705 crore. Overseas investors have remained net buyers of Indian equities to the tune of ₹10,869 crore so far in July, after pulling out ₹2,71,915 crore over the previous four months.