NEW DELHI: Backed by the high possibility of interest rate cuts by the US Federal Reserve in the coming months, domestic equity market witnessed another week of stellar gain with the benchmark indices -- BSE Sensex and NSE Nifty50 -- surging about 2.3% each between Monday and Friday (December 11-15).
This is also the longest weekly winning streak in six years (since January 2018) for the two benchmarks as they registered a gain for the seventh consecutive week. Sensex gained 969.55 points or 1.37% to close at 71,483 on Friday while the NSE Nifty advanced 273.95 points or 1.29% to shut shop at 21,457. Like Thursday, IT stocks were again in major demand on Friday as the Federal Reserve’s dovish view on the US economy indicates healthy business opportunities for domestic IT companies in the world’s biggest market.
The ongoing rally picked up a pack after the victory of PM Narendra Modi-led Bharatiya Janata Party (BJP) in Madhya Pradesh, Rajasthan and Chhattisgarh state elections. The market received another booster this week when 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.
The two developments coupled with favourable factors such as sharp growth in September quarter GDP numbers, robust GST collections, a fall in consumer inflation, a fall in crude oil prices and an easing of bond yields have made India a very attractive market, especially for the foreign institutional investors (FIIs), despite being more expensive than other emerging economies. FIIs net bought `9,329 crore worth of equities on Thursday, according to provisional NSE data.
Vinod Nair, Head of Research at Geojit Financial Services, said the ease in US bond yield and the expectation of multiple rate cuts by the Fed in 2024 further fuelled market optimism. “Investors expressed confidence that clouds over US economic growth would dissipate in H2CY24, anticipating a soft landing facilitated by normalization in monetary policy.
The IT sector rallied 7.6% this week in expectation of a rise in demand from the US, optimism about AI-based opportunities, and hope that the Fed will cut interest rates in 2024,” said Nair. Shares of Tata Consultancy Services (TCS) and Infosys logged more than 5% gain on Friday.
Easing of bond yields have made India an attractive market, especially for FIIs, despite being more expensive than other emerging economies