Fed cheer takes market to fresh highs
Indian equities rose to record highs on Thursday after the US Federal Reserve’s dovish stance and forecast of rate cuts next year triggered a global rally.
The benchmark Sensex rose 1.34 per cent or 929 points to close at 70,514, while the Nifty was up 1.2 per cent or 256 points at 21,182 led by broad-based buying. The Nifty Midcap and Smallcap indices also registered fresh all-time highs.
The Fed kept interest rates unchanged on Wednesday for a third time, at 5.25-5.5 per cent, a 22-year high. The officials, however, hinted at a 75-basis points reduction in rates next year, causing the US Treasury yields to fall to a 5-month low of 3.95 per cent and triggering a rally in global shares. The domestic 10-year bond yields fell to a one-month low of 7.20 per cent. Meanwhile, the Bank of England on Thursday left its main interest rate at a 15-year high of 5.25 per cent.
“The market continued its exuberance and hit a fresh high amid the dovish commentary from the Federal Reserve, signalling at least three rate cuts in 2024. Further, the sharp fall in US bond yields improved investors’ confidence. An upgrade in India’s GDP forecast, ease in global oil prices, and the RBI decision to clamp down inflation to the target level led to a broad-based rally with outperformance from realty and IT,” said Vinod Nair, Head of Research at Geojit Financial Services.
Tech stocks rise
Gains on Thursday were led by technology stocks, with Tech Mahindra, up 4 per cent, the top gainer. LTIMindtree, Infosys, Wipro, and HCL Tech gained over 3 per cent each. All sectors ended in green, except healthcare and consumer durables. Realty and IT were top sectoral gainers, up more than 3 per cent each. Fifty-two per cent of BSE components advanced, while 45 per cent declined.
India’s wholesale price climbed for the first time in eight months on costlier food, validating the RBI’s worries on stickier inflation.
Growth drivers
“Favourable macroenvironment, buying by FPIs, fall in bond yields and crude oil prices are helping the market scale new highs. Growth stocks will be in focus, with expectations of rate cuts globally in 2024. Some of the sectors that are likely to benefit from lower interest rates are banking, IT, auto and real estate,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.
Also read: Market bull run hinges on expectation of earnings growth, says Nilesh Shah of Kotak Mahindra AMC
FPIs bought shares worth ₹3,570 crore on Thursday while domestic institutions acquired shares worth ₹553 crore, provisional data showed.
US stocks rallied Wednesday, sending the Dow Jones to a record high, after the Fed maintained a status quo and hinted at rate cuts next year. Asian indices ended in the green on Thursday, with Jakarta Composite the top gainer. Nikkei 225 and Shanghai Composite, however, ended in the red. European indices were trading in the green.
The next resistance for Nifty is seen at around 21,430, with 21,000 as the support. “The near-term trend continues to be positive. There is a possibility of Nifty reaching towards the important resistance of 21,550 levels in the coming week. Immediate support is placed at 21,050 levels,” said Nagaraj Shetti, Senior Technical Research Analyst, HDFC Securities.