Reflecting global trends, domestic markets surged Thursday with the Sensex and the Nifty touching fresh record highs, after the US Federal Reserve left the interest rates unchanged and signalled possible rate cuts in 2024.
The BSE’s 30-share Sensex climbed 930 points, or 1.34 per cent, to end at a new high of 70,514.2. It touched 70,602.89 for the first time during the intraday trades.
The NSE’s Nifty gained 256.35 points, or 1.23 per cent, to close at an all-time high of 21,182.7.
The US Federal Reserve kept the Fed Funds Target Rate (FFTR) unchanged at 5.25-5.5 per cent as inflation eased from its highs.
In a press conference after the announcement of the policy, US Federal Reserve Chair Jerome Powell said if the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 4.6 per cent at the end of 2024, 3.6 per cent at the end of 2025, and 2.9 per cent at the end of 2026, still above the median longer-term rate.
Geojit Financial Services’ Chief Investment Strategist V K Vijayakumar said the clear dovish message from the Fed on December 13 has set the stage for a smart Santa Claus rally in the coming days, and this can even trigger a pre-election rally that can take the markets to a series of new highs.
“The takeaway from the Fed message is that the tightening cycle is over and three rate cuts are possible in 2024. The market expects four. The record breaking rally in the Dow will send many indices to new records,” he said.
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The Fed’s decision led to a fall in the yield on 10-year US bond to around 4 per cent, while domestic 10-year bond yield fell to one-month low at 7.20 per cent.
Nifty Midcap and Small-cap indices also registered fresh all-time highs. Advancing shares outnumbered declining shares for the second day in the row as advance decline ratio stood at 1.21 levels on BSE.
“Next resistance for Nifty is seen at 21,430, which happens to be 76.4 per cent extension level of the recent swings. The psychologically important number of 21,000 now becomes support for Nifty,” said Devarsh Vakil, Deputy Head Retail Research, HDFC Securities.
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Domestic equity indices have been rallying for the past few days buoyed by strong growth prospects, hopes of political continuity after the 2024 general elections, improvement in corporate earnings and easing crude oil prices.
So far in the current month, the Sensex and the Nifty have gained over 5 per cent.
“Favourable macro environment, buying by FIIs, fall in bond yields and crude oil prices is helping the market to scale new highs. Growth stocks will be in focus, with expectations of rate cuts globally in 2024,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.
Some of the sectors that are likely to benefit from lower interest rates are banking, IT, auto, and real estate.
While foreign portfolio investors (FPIs) bought Rs 3,570 worth of domestic equities on a net basis, domestic institutional investors purchased Rs 553.17 crore of shares, the BSE’s provisional data showed.
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So far in December, FPIs have invested Rs 39,260 crore, compared to Rs 9,000 crore in November.
Vijayakumar said the crash in the US 10-year yield to around 4 per cent will trigger large capital flows to India. The main beneficiaries will be the large caps, particularly the fairly valued large caps in banking. IT too is likely to attract buying.
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“Retail exuberance can lift the mid and small caps, too; but there is no valuation comfort in this segment,” he said.
Sensex surges past 70K to record high after US Fed pauses — and signals cuts - The Indian Express
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