Nifty's Best Day in Four Months Arrives With 5.54% Inflation and India's Biggest IPO

Nifty 50 closed at 22,997.35 on Thursday, up 374.65 points or 1.66%, and Sensex closed at 74,315.61, up 1,533.72 points or 2.11%, according to HDFC Sky's close report, the biggest single day gain in four months. On Friday Nifty rose a further 0.65% to 23,146.15 and Sensex 0.56% to 74,729.27, a second straight gain. Measured from last Friday's close, Nifty ended the week up about 2.8% and Sensex about 3.1%. IT did the lifting, with the sector up about 4%: Tech Mahindra jumped 8.5% after a better than expected revenue print, TCS rose 4.9% and Infosys 4.6%. Midcaps slipped 0.1% and smallcaps were flat, so the gains were concentrated in large caps. Brent stayed near $105 to $108, depending on the source.

The global backdrop helped. US consumer inflation for September rose to 3.7%, faster than expected, which raised the possibility of another Fed rate hike this year, and Wall Street sold off in technology and AI linked stocks. That pulled the US 10 year yield down to about 5.11% from 5.33%, which eased pressure on emerging markets, and Brent crude fell 1.5% to $104.40. The Fed meets on October 28.

Under the surface the picture was weaker. On Thursday 2,606 stocks declined against 1,592 advancers, the Nifty Midcap fell 0.4% and the Smallcap fell 1.3%. Foreign portfolio investors sold for 15 straight sessions through Thursday, about Rs 10,156 crore from Monday to Thursday, with domestic institutions buying about Rs 11,473 crore in response. One analyst called the move a relief rally, noting that Nifty remains below its 50 day and 200 day moving averages, with support near 22,800 and resistance near 23,200.

The global AI trade is cooling

The sharpest signal came from Asia. South Korea's Kospi fell 7.57% on Thursday to 5,554.22, its lowest close since April and about 21% below its September high, which put it in a bear market, according to Sunday Guardian. Samsung Electronics and SK hynix each fell more than 9%. Earlier in the week, on Monday in the US, Micron fell 3.6% on reports of advances by China's memory chipmaker CXMT. The concerns cited include AI spending and funding, Chinese competition and the risk of higher US interest rates. Korea bounced about 3% on Friday after Wall Street closed higher, though foreign investors were still net sellers there, so the rebound may prove short lived.

Why this matters for India: India has little direct exposure to the AI chip boom, and a cooling in that trade can redirect global money towards markets that were left behind. That is our reading, not a forecast, and foreign selling in India has been running for weeks, so it needs to show up in actual foreign flows before it counts as a change.

Retail inflation rose to 5.54% in September from 4.83% in August, and food inflation reached 7.74%, according to a summary of the official data. Vegetables did most of the damage: onion inflation more than doubled to about 108%. Rural inflation at 6.08% ran well ahead of urban inflation at 4.88%. A day later, provisional wholesale inflation came in at 11.39%, up from 9.92%, with fuel and power at 25.85%.

The numbers land one week after the RBI raised the repo rate to 5.50% and projected FY27 CPI at 5.2%. The September reading adds to the pressure. The RBI has said its next move can only be a hike or a pause, and its minutes are due on October 21. One report says markets are increasingly pricing a larger hike in December. That is an expectation, not a decision.

Two weeks into results season, the IT majors have split. HCLTech reported revenue of Rs 35,620 crore, up 11.5% year on year and 3.0% from the previous quarter, and net profit of Rs 5,132 crore, up 21.2%, according to Free Press Journal. Nifty IT rose 5.2% the next day. Wipro, reporting on Thursday, grew revenue 9.1% to Rs 24,753 crore, but profit fell 1.4% to Rs 3,200.6 crore.

Wipro's bookings fell 22.9% from the previous quarter in constant currency, and it guided the December quarter to a range from a 1.5% decline to 0.5% growth. Infosys reports on October 23.

Jio Platforms has set a price band of Rs 1,065 to Rs 1,119 per share for an IPO seeking Rs 30,213 crore at the upper end, a valuation of about Rs 10.3 trillion, according to Business Standard. That would be larger than Hyundai Motor's Rs 27,859 crore offering in 2024. The anchor book opens on October 19 and the issue is open for subscription from October 21 to 23. Reports say global sovereign wealth funds and asset managers, as well as domestic mutual funds and insurers, are among the likely anchor bidders, but nothing is confirmed until allotment.

Two features are worth noting. It is a fresh issue with no offer for sale, so existing investors, including Meta (9.98%) and Google (7.73%), are not selling any shares in the IPO, even though ET reports their holdings have more than doubled in value. That is a vote of confidence worth noting, though it also reflects the structure of the issue and is not a promise about the future. Second, about Rs 27,500 crore of the proceeds is planned to prepay borrowings, so most of the money retires debt rather than funds new projects.

On Thursday a Supreme Court bench dismissed appeals by Yes Bank, the RBI and the Centre against the Bombay High Court's January 2023 judgment, which had quashed the write off of Yes Bank's Additional Tier 1 (AT1) bonds worth Rs 8,415 crore as part of the bank's 2020 reconstruction. The bench said it decided the questions on merits and answered both in the negative. Yes Bank shares fell as much as 20% intraday to Rs 16.96, and were down about 14% at Rs 18.21 mid afternoon, while Nifty rose.

What happens next is not yet clear. Analysts said it is unclear whether the obligations will be honoured, how, or what solution emerges, and the bank's next steps and its Q2 results on October 17 will matter. The reports we reviewed did not discuss the wider AT1 market.

The large private banks report on Saturday, and management commentary on margins and loan growth will matter. Beyond that, the calendar is dominated by Jio's IPO window, the RBI's minutes and the Fed's October 28 meeting. Foreign investors have been net sellers for weeks, so a return of foreign buying would be a notable change.

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