Indian Stock Indices Reach Record Highs as Sensex Surpasses 66,000 Mark
In a continuing bullish trend, Indian stock indices have soared to new heights, with the benchmark Sensex breaching the 66,000 mark, according to the latest reports. At the time of writing, the Sensex and Nifty were both up by approximately 1 percent, standing at 66,018 points and 19,562 points, respectively.
The surge in stock prices can be attributed to several factors, including a steady influx of foreign funds, a positive economic outlook, and a decline in inflation. However, analysts have cautioned that further rallies may be unlikely due to high valuations.
Experts believe that the recent US consumer inflation for June, which came in at 3 percent (better than market expectations of 3.1 percent), has contributed to the ongoing global rally in stock markets. The decrease in core inflation to below 5 percent suggests that the disinflation process is taking place in the US, and this might persuade the Federal Reserve to pause in their rate decision later this month.
While the current market cues are positive, Chief Investment Strategist at Geojit Financial Services, VK Vijayakumar, has warned that high valuations may restrain the bulls from charging ahead ferociously.
On the domestic front, retail inflation in India rose considerably in June to 4.81 percent, driven by a sharp increase in vegetable prices. Both rural and urban inflation witnessed an uptick, with rates standing at 4.72 percent and 4.96 percent, respectively.
The surge in tomato prices across India has been a major contributor to inflation. The rise has been observed throughout the country and not limited to a specific region. In key cities, tomato prices have even reached as high as Rs 150-160 per kg. Other food items such as meat, fish, eggs, pulses, and spices have also seen an increase in prices.
Despite the rise in inflation, Vivek Rathi, Director of Research at Knight Frank India, believes that it remains within the Reserve Bank of India’s tolerance band of 2-6 percent and is not the biggest concern for the economy. Rathi suggests that the stability of the rupee, along with firm import inflation and wholesale prices, will help balance consumer price growth in the coming months.
The stock market’s record-breaking performance coupled with retail inflation poses a unique challenge for the Indian economy. Balancing these two factors will require careful monitoring and strategic interventions in various sectors. As the Indian stock indices reach unprecedented highs, investors and experts alike are closely watching the market dynamics to make informed decisions.
