MUMBAI: An inflation reading in the US that came in below analysts’ estimates, has now raised the hope of a Santa Claus rally around the globe, including in India.
On Tuesday evening, the US government data showed that the consumer inflation for November was 7.1%, below 7.7% in October and consensus estimate of 7.3%. The number lifted investor sentiment which led to a 2.5% rally in Nasdaq Composite and over 1% gain in Dow Jones index while the SGX Nifty, a derivative of India’s Nifty index that’s traded on the Singapore exchange, showed a spurt of nearly 1%. A stock market rally leading to Christmas is popularly called a Santa Claus rally.
According to Apurva Sheth, Head of Markets Perspective & Research, Samco Securities, after the US CPI for November came in at below the consensus estimate and below the previous reading too, investors have heaved a sigh of relief as this brings us closer to the actual US Fed pivot of interest rates. “The Fed Chief had said that he might go slow on hiking rates. This might soon become a reality now,” Sheth said. “We expect that this can fuel an early Santa Claus rally in the US and global equity markets.”
The rally in the global markets could spill over into India as mutual funds, flush with money from retail investors through the SIP route, remain net buyers. And these institutions are being joined by foreign funds which, despite December being a usually lean month for overseas fund managers, have net pumped in over Rs 8,600 crore into stocks so far in the month.
On Tuesday, the sensex rallied 403 points to 62,533 points and reversed a two-session of losses. The rally was led by , and . On the other hand, selling in stocks like , and limited the gains to some extent, BSE data showed.
The Santa Claus rally of the next few days, however, may not spill over to the next year, at least two leading foreign brokerages are indicating in that direction.
During the day BofA Securities said that they expect a rally of about 5% in 2023 since the Indian market looks valued and there are chances of a cut in earnings of Nifty companies due to factors external to India. It has set a Nifty target of 19,500 points for December 2023.
, another leading foreign brokerage house, said that it expects the sensex to be at 66,000 points by December 2023, a gain of 5.5% from Tuesday’s close. The broking house is overweight on China, Hong Kong and Thailand and neutral on India, Korea and Indonesia.
