NEW DELHI: Domestic equity markets scaled to fresh highs on Thursday, with the benchmark indices — BSE Sensex and NSE Nifty50 — gaining nearly 1.3% each after the US Federal Reserve signalled the end of its hawkish stance and at least three rate cuts next year.
Sensex ended 929.60 points or 1.34% higher at 70,514.20 while the Nifty 50 closed at 21,182.70, up 256.35 points or 1.23%. Investors’ wealth surged by Rs 4 lakh crore as the market capitalisation of the BSE-listed companies rose to Rs 355.10 lakh crore.
Parth Nyati, founder of Tradingo, said a confluence of domestic and global factors is driving a Goldilocks scenario in the Indian equity market. “Unwavering political stability, a robust macroeconomic backdrop with healthy GDP growth and subdued inflation, and weakening dollar and US bond yields amid expectations of a 2024 rate cut have fuelled bullish momentum.”
Additionally, a slump in crude oil prices, which had eased inflation pressure and foreign institutional investors (FIIs), also supported the market rally. FIIs net bought Rs 3,570 crore worth of equities on Thursday, according to NSE data. As per NSDL data, FIIs have invested a net of Rs 39,260 crore so far in December.
The US Federal Reserve in its latest policy meeting maintained interest rates within the range of 5.25%-5.50% and signalled a plan to implement three rate cuts in 2024. This led to a sharp rally in equity markets worldwide.
When the Federal Reserve announces rate cuts, FIIs increase their exposure in emerging markets such as India as it offers them a better risk-reward scenario. The rake hike lowers the strength of the US dollar and makes the safer US bond yields less attractive.
Additionally, other central banks around the world follow the Fed lead when it comes to increasing/decreasing future interest rates. This means that the RBI may also go for multiple rate cuts next year which will make borrowings easier for corporates and improve their earning margins- a big positive for the equity market.
IT shares witnessed maximum buying on December 14, with the Nifty IT index jumping as much as 3.5%. Among the Sensex pack, Tech Mahindra, Infosys, Wipro, HCL Technologies, IndusInd Bank, Bajaj Finance, Bajaj Finserv and Mahindra & Mahindra were the major gainers. On the other hand, Power Grid, Nestle, Titan, JSW Steel, Maruti and Tata Motors were the major laggards.
