Sensex surges 650 points: What's behind today's rally?
What's the story
The Indian stock market witnessed another rally today, with the Sensex and Nifty rising by over 0.8% each. Sensex gained over 650 points, while Nifty 50 rose above 24,350 during Friday's trading session. The rally was largely driven by easing tensions in West Asia and lower expectations of US Federal Reserve rate hikes. The gains added nearly ₹2.4 lakh crore to the total market capitalization of all companies listed on BSE, pushing it up to ₹482 lakh crore.
Sector performance
IT stocks lead the market rally
Information Technology (IT) stocks led the market rally with HCL Tech, Tech Mahindra, Infosys, and TCS shares rising between 2-5%. Other companies like Tata Steel, Bajaj Finserv, and Bharat Electronics also saw their shares rise by over 1% each. However, M&M shares bucked the trend and fell nearly 1% during Friday's trading session.
Market analysis
Broader markets underperform against benchmarks
The broader markets underperformed against the benchmarks with the Nifty Midcap 100 index rising only by 0.2% and Nifty Smallcap 100 index by 0.5%. This comes as India VIX, which measures market volatility, dropped over 1% to 12.13. The overall market breadth was positive with more advances than declines on NSE today.
Global influence
US job growth slows down, labor market cools
The slowdown in US job growth has led to a cooling labor market, prompting financial markets to lower expectations for an imminent rate hike. The unemployment rate fell to 4.2% last month from 4.3% in May. This drop happened because people stopped looking for work, driving the labor participation rate down to its lowest level in over five years.
Market response
Fed likely to remain on hold until October
The tepid jobs data has lowered traders' expectations of an imminent rate hike and increased the chances that the Fed will keep rates on hold until October. Traders are now pricing in a 46.8% probability that the US central bank will keep rates steady at its meeting on September 15-16, up from a 35.8% chance a day earlier, according to CME Group's FedWatch tool.
Currency market
Rupee gains against US dollar
The Indian rupee strengthened by 18 paise to 95.17 against the US dollar in early trade today. This was due to a weaker US dollar after a lukewarm jobs report from the country. The dollar index, which measures the greenback against a basket of currencies, was down by 0.2% at 100.77 after falling by 0.5% on Thursday.