Mumbai: Dalal Street resumed its bullish momentum on Thursday as key benchmark indices zoomed over 1% in early trade, fuelled by positive sentiments after the US Federal Reserve signalled a slowdown in the pace of future interest rate hikes.
The BSE Sensex surged over 650 points to breach the psychological mark of 70,000 while the broader Nifty50 index climbed past the 21,000 level. Both indexes had fallen for two consecutive sessions as investors awaited policy cues from the Fed’s meeting outcome.
The signs of dovish stance from the US central bank boosted risk appetite on Dalal Street, with banking, auto and financial stocks leading the morning rally. Traders took heart from comments by Fed Chair Jerome Powell indicating rates may be raised in smaller increments going forward and could start coming down next year.
Powell acknowledged the US economy was showing signs of slowing and indicated rates have risen to a level that could reasonably be expected to restrain demand. This fed into hopes that inflation, currently hovering around 7-8% in many major economies, could also start easing gradually.
Experts noted the Fed has indicated a significant downshift in its aggressive rate hiking cycle, giving more room for global central banks including India’s RBI to consider softer policies going ahead. The more moderate approach by the Fed even raised prospects of a rate cut at some point in 2024.
Meanwhile, overnight gains in US stock indices like the S&P 500 and Nasdaq Composite also lifted spirits. Asian markets joined the advance with benchmark indexes in Japan, South Korea, China and Australia clocking solid percentage increases.
While uncertainties persist over the pace of global economic recovery, most analysts expect the relief rally in domestic shares to continue in the near-term barring any major negative surprises. With foreign investors steadying their purchases as well, Sensex nearing the psychologically crucial 70,000 level carried positive portents.
Oil marketing companies also saw handsome buying as crude oil rates eased from recent peaks. Broader markets too participated in the gains, with the midcap and smallcap indices climbing over 1.5% each.
Among sectors, realty, capital goods, banking and finance counters were prominently contributing to the robust uptrend. Bajaj Finance topped bluechip gainers with a 4% jump while Bajaj Finserv surged 3.5%. Index majors RIL and HDFC Bank rose over 2% each.
The overall optimism on Dalal Street was boosted by declining retail inflation trends at 6.8% for October along with a narrowed trade deficit of $26.91 billion last month. While long-term drivers remain intact, some intermittent profit booking cannot be ruled out given high valuations, say traders.
