Mumbai, India (BBN) – The Sensex surged 187.74 points to close at 29,585.85 and the Nifty climbed 68.90 pts 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”, reports The Hindu Business Line.
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 2.78 per cent, followed by consumer durables 1.65 per cent, capital goods 1.45 per cent and infrastructure 1.41 per cent.
Top five Sensex gainers were Tata Steel (+4.18 per cent), Adani Ports (+4.07 per cent), Asian Paints (+2.03 per cent), Bajaj Auto (+1.56 per cent) and L&T (+1.36 per cent), while the major losers were Hero MotoCorp (-1.52 per cent), Reliance (-0.62 per cent), Bharti Airtel (-0.59 per cent), Coal India (-0.49 per cent) and ICICI Bank (-0.26 per cent).
The 30-share index surged 206.40 points or 0.70 per cent to 29,604.51. The gauge had shed 44.52 points in the previous session.
The NSE index Nifty rallied 68.10 points or 0.74 per cent to trade at an all-time intra-day high of 9,152.90, breaching its previous record of 9,122.75 (intra-day) touched on Tuesday.
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.