NEW RECORD: Sensex ends at all-time high on closing basis

“The strongest tailwind for equity markets globally is the peaking of inflation in the US and the possibility of a slower pace of rate hikes. In tune with this trend, CPI inflation in India, too, has declined to 6.7 % in October from 7.4 % in September. The decline in crude to $92 dollars is another positive. All these can take the Nifty to a new record, but in typical market characteristics, it may not happen when the consensus expects it to happen," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

"A healthy trend in the market now is the slow accumulation in high quality large-caps. Sustained buying by the FIIs is supporting this trend. Some profit booking may be considered in mid and small-caps which have run up on good results," he added.

Data released on Monday showed that India's annual retail inflation ease to 6.77% in October, from 7.41% in the previous month, data showed on Monday. However, that was higher than the 6.73% forecast by economists in a Reuters poll and the central bank's 2%-6% target band.

From the Sensex pack, Power Grid, ICICI Bank, Bharti Airtel, UltraTech Cement, State Bank of India, Dr Reddy's and Asian Paints were the major winners. ITC, Reliance Industries, Bajaj Finserv and Nestle were among the laggards.

Global markets have turned risk-on in recent days, trading off a softer-than-expected US data print that many reckon will allow the Fed to raise rates in 50 basis-point increment, after three 75 basis-point hikes. That view was encouraged by Vice Chair Lael Brainard who said on Monday it would probably be appropriate soon to move to a slower pace of increases.

"Following gains in global equities, early losses in the domestic market were reversed with banking stocks steering the recovery. Food and commodity price declines have helped to keep domestic inflation below 7%. Although the CPI has continued to remain above the RBI's tolerance limit of 6%, it is estimated that it will begin to fall within the range from Q1 FY24," said Vinod Nair, Head of Research at Geojit Financial Services.

The rupee and bond markets also finished on a strong note. Rupee gained 17 paise to close at 81.11 against US dollar. Indian government bond yields ended lower for a seventh consecutive session on Tuesday, with benchmark yield at lowest in nearly two months, as easing inflation raised bets that the central bank will slow down its pace of policy tightening. The benchmark Indian 10-year government bond yield ended at 7.2613%, after closing at 7.2866% on Monday.

Nifty technical outlook

“Rally gathered pace towards the closing hours after trading range-bound for a major part of the trading session. Majority of the European and Asian indices logged gains, which had a rub-off effect on the local benchmarks. Sharp fall in the crude oil prices and the strengthening rupee against the dollar boosted investors' confidence. With domestic inflation showing signs of cooling, traders are hoping that the RBI in next month's policy meeting may take a dovish stance in its rate setting decision. For the trend following traders, 18300 would be the sacrosanct support level. Above which, the index could rally till 18500-18600. On the flip side, if the index trades below 18300, the chances of hitting 18230-18200 would turn bright," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.