Fed balm for stock markets

Indian markets cheered the Federal Reserve’s decision to keep the interest rates unchanged. Also, Fed Chairman Jerome Powell saying inflation had been coming down, there are signals that there will be long pause or possibly no more rate hikes.

Domestic benchmarks recovered after two consecutive days of decline. Sensex rose 611 points to 64,202.64 on intraday basis before closing at 64,080.90, up about 489 points, or 0.77%. Nifty closed up 144 points, or 0.78% at 19,133.25. Intraday, it had risen as much as 186 points, or 0.98%.

The gains were led by realty, telecommunications and utilities sectors. BSE Realty rose 2.55%, while BSE Telecommunications gained 2.42% and BSE Utilities rose 1.78%.

“Our sense is that markets could still be in the range of 18,800-19,600. If no negative major surprises come up in the next few days, markets could move further higher, beyond this consolidation page,” said Pankaj Pandey, Head of Research at ICICI Direct.

Meanwhile, Deepak Jasani, Head of Retail Research at HDFC Securities, added that Nifty could now extend its up move and head towards 19,235, while 18,973 could offer support.

Following the Fed’s decision, US 10-Year bond yields declined by 8 basis points on Thursday to 4.65%- the lowest since October 16. “Yields have been one of the major trigger besides the geopolitical issues in terms of the kind of consolidation which was going in the market,” added Pandey. If yields continue to remain below 5% in the US, there is a possibility that the overall interest rate-sensitive sectors in India will look up, he elaborated.

The central bank’s decision to keep policy rate unchanged at 5.25%-5.50%, was on expected lines in terms of no hikes, however that came as a bit of positive surprise which led to the market correction, Pandey said. He further explained that the expectations of rate cut for next year in June has gone up, while that of a hike is getting muted. As a result, the yields have softened in the US which came as a positive surprise, he added.

The domestic market recovery also propelled investor wealth flow, which increased by Rs 3.02 trillion to Rs 313.24 trillion. The stock of companies such as IndusInd Bank (+2.04%), Tata Motors (+1.51%), Sun Pharmaceutical Industries (+1.41%) were the top Sensex gainers, while Tech Mahindra (-0.59%) and Bajaj Finance (-0.27) were the top losers.

However, foreign portfolio investors continued to sell and offloaded shares worth Rs 1,261.19 crore on Thursday, while domestic institutional investors remained net buyers and purchased holdings worth Rs 1,380.15 crore, according to provisional data from the exchanges.