Sensex surges 188 points, Nifty hits new closing peak of 9,154 on Fed's dovish stance

Rajalakshmi S Updated - January 15, 2018 at 10:33 AM.

Metal, power stocks hog the limelight

sensex

The Sensex surged 187.74 points to close at 29,585.85 and the Nifty climbed 68.90 points to hit a new closing peak of 9,153.70 as the Federal Reserve, as expected, raised the benchmark interest rate by a quarter percentage point, but gave a more dovish outlook for future hikes.

The Fed lifted its funds rate by 25 basis points, as expected, to a range of 0.75 per cent to 1.00 per cent, but said further increases would only be “gradual''.

The gains, which tracked Asian markets, came after the Fed stuck to its outlook for two additional rate increases this year after lifting its overnight interest rate by 25 basis points on Wednesday as had been expected.

The tempered rate outlook knocked the dollar and eased worries of a fresh burst of capital outflows from emerging economies such as India. Some market watchers had recently speculated the Fed could hike rates four times this year as the US economy gathers momentum.

Among BSE sectoral indices, metal index was the star-performer and was up 2.84 per cent, followed by power 1.8 per cent, consumer durables 1.68 per cent and infrastructure 1.62 per cent.

Top five Sensex gainers were Adani Ports (+4.73%), Tata Steel (+4.3%), Bajaj Auto (+2.31%), Asian Paints (+2.23%) and Infosys (+1.62%), while the major losers were Hero MotoCorp (-1.32%), Bharti Airtel (-0.8%), Reliance (-0.54%), Coal India (-0.36%) and ICICI Bank (-0.25%).

Modi's big win

Sentiment had already been turning more bullish after a big election victory by Prime Minister Narendra Modi's ruling party in the key state of Uttar Pradesh at the weekend.

Hopes for sustained foreign flows into India have also sparked a rally in the rupee, which hit as much as 65.2250 per dollar, its strongest since October 30, 2015.

Traders were split about whether the central bank had again intervened on Thursday to slow the gains, after stepping in the previous two sessions.

Meanwhile, the benchmark 10-year bond yield fell 5 basis points to 6.78 per cent.

But the rally in markets has also raised strong doubts about its sustainability given concerns about share valuations and worries events such as upcoming elections in France will keep global flows volatile.

“I am a little concerned with this movement as I feel that the fundamentals of companies do not support this upward market movement (in shares). My expectation is that we may see a big correction of around 7-8 percent by April,” said R.K. Gupta, managing director at Taurus Asset Management Company.

Foreign investors bought around a net $820 million in Indian shares in the two trading sessions after Modi's electoral win was announced.

Gains in share markets over this week have been widespread, with 45 out of 50 members in the NSE index rising on Thursday.

Global markets

World stock indexes surged to record highs on Thursday while the dollar traded close to a one-month low after the Federal Reserve hiked US interest rates but signalled no pick-up in the pace of tightening.

Markets also reacted positively after Dutch centre-right Prime Minister Mark Rutte fought off a challenge by anti-immigration, anti-European Union rival Geert Wilders to score an election win seen as a victory against populist nationalism.

Published on March 16, 2017 10:40