Although markets heaved a sigh of relief after US Fed’s move and a monetary stance that appeared dovish, gains in near term are seen limited as focus will shift back to corporate earnings & policy reforms
Mumbai : After being relatively subdued in the first half of the session, benchmark indices rose smartly in the latter half and ended at two-week highs, tracking the rally in European equities.
Sentiment improved globally after the uncertainty over the US Federal Reserve’s policy action faded with the announcement of a 25-basis-point hike in interest rates late Wednesday.
Foreign institutional investors net bought shares worth Rs 6.38 bn in Thursday’s session, while domestic institutional investors sold shares worth Rs 3.66 bn
After touching a high of 7852.90 points intraday, Nifty 50 ended up 1.2% at 7844.35 points. The S&P BSE’s Sensex ended up 1.2% at 25803.78 points after rising to the day’s high of 25831.31 points. The premium of the Nifty 50 December futures contract to the spot widened to 12.85 points from 7.30 points in the previous session, as traders built long positions in the contract. The open interest rose 2.7% to 20.03 mln.
Although the markets heaved a sigh of relief after US Fed’s move and a monetary stance that appeared dovish, gains in the near term are seen limited as the focus will shift back to earnings of the companies and policy reforms. While flows from foreign institutional investors will be restrained, dealers do not see any major outflows since India is still seen as a safer bet compared with the other emerging markets and the valuations remain compelling.
Provisional data showed that foreign institutional investors net bought shares worth Rs 6.38 bln in Thursday’s session, while domestic institutional investors sold shares worth Rs 3.66 bln.
Rate-sensitive sectors gained as the global risk-appetite improved after the US Fed ended the uncertainty over interest rate hikes. Nifty Bank, Nifty PSU Bank, Nifty Energy, and Nifty Metal indices rose over 1-3%. Several stocks in the midcap space rallied with Capital First, IVRCL, IDBI Bank, Amtek Auto, TD Power Systems, TV18 Broadcast, BEML, Eros International Media and Firstsource surging 6-10%.
With the US rate hike now behind it, the focus of equities will now shift to domestic triggers, the most immediate of which will be the ongoing session of Parliament, followed by earnings for Oct-Dec quarter. The progress on the passage of the Goods and Services Tax Bill has been far from encouraging so far, with the winter session of Parliament turning out to be a washout like the Monsoon session.
“We are not ignorant on impending GST bill but feel that market has already discounted possibility of its non-passage in winter session,” Jayant Manglik, president of retail distribution at Religare Securities said.
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Markets will have to reconcile to new situation: Jaitley
New Delhi: Finance Minister Arun Jaitley said with the suspense about the US Federal Reserve’s rate hike now over, markets will have to reconcile to the new financial situation.
Asked about the behaviour of the currency markets in the wake of the rate hike and how the government intends to tackle possible capital outflows, the Finance Minister said, “Let’s watch for a few days.” The government claimed that Indian markets are “well fortressed” to deal with any major volatility and Fed rate hike will have minimal impact on the economy. It also does not expect any large-scale outflow of foreign funds.