BENGALURU: Indian shares recovered from a lacklustre start to end higher on Tuesday, with IT and pharma stocks leading the charge ahead of crucial U.S. inflation data that could pave the way for interest rate cuts.
The Nifty 50 index closed up 0.42% at 25,041.1, while the S&P BSE Sensex gained 0.44% to 81,921.29.
Both the benchmark indexes rose about 0.25% in early trade before surrendering gains, weighed down by heavyweight financials.
However, a 1.7% rise in IT companies, ahead of Wednesday’s U.S. inflation report, helped lift domestic equities.
Indian IT firms gain a significant chunk of revenue from the United States.
“A softer-than-expected U.S. inflation data could boost the chances of a 50 basis point Federal Reserve rate cut and spur a global stocks rally,” said Sunny Agrawal, head of fundamental equity research at SBICaps Secuties, adding that markets have priced in a 25 basis point cut as the most probable scenario.
Consumer stocks help Indian shares end higher in choppy session
Pharma stocks gained 1.1% after India’s goods and services tax (GST) council recommended cutting tax on select cancer drugs.
Investors are seeking safety and parking money in defensive segments like consumer and pharma ahead of the likely Fed rate cut, Agrawal said.
In contrast, financials dropped 0.3%, weighed down by insurers HDFC Life and SBI Life after posting modest growth in premiums for August.
Among individual stocks, pharma company Divi’s Laboratories jumped about 5% to a near three-year high on block deals.
Budget airline SpiceJet rose 3% after Carlyle Aviation agreed to convert $30 million worth of lease arrears to equity.
The more domestically focussed small- and mid-caps rose about 1.2% each.
Liquidity surplus in the markets is supporting the strategy of buying dips, but a clear directionality for domestic equities will only emerge after U.S. inflation data and Fed rate decision next week, analysts said.
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