As the US Fed forecasts rate decreases in 2024, Nifty and Sensex reached fresh highs. Here are the opinions of experts

The US Federal Reserve indicated that it would stop raising interest rates in 2024, marking the end of its program of doing so. As a result, the Sensex and the Nifty saw another high in intraday trading today.

While the Nifty50 index gained 263 points to reach a record high of 21,189.55, the Sensex gained nearly 955 points to reach a new high of 70,540.

Just in December, both indexes had gains of more than 5%, with negative returns occurring in just two of the ten sessions this month. They have gained 13% over the last year and 16% year-to-date in 2023.

The US Federal Reserve decided to maintain a stable benchmark interest rate on December 13, indicating that the tightening of monetary policy is likely to come to an end. Notably, the market was taken aback when Federal Reserve Chair Jerome Powell made hints about a probable rate reduction in 2024. As of right moment, market experts anticipate up to three rate reductions in 2024.

The Fed’s officials said that they intend to lower the benchmark interest rate by three-quarter points in the next year, which is less than the five that the financial markets and some experts had predicted. This cautious outlook for 2024, which may start in the second half of the year, implies that policymakers think high borrowing rates will be required for a considerable amount of the year in order to keep reducing expenditure and inflation.

The dovish comments from the Federal Reserve had a significant effect, pushing the Dow Jones Industrial Average above 37,000 for the first time. These remarks are seen as an indication of the central bank’s effectiveness in controlling inflation, which has been a recurring worry for investors in bonds and stocks in recent times.

This is a change from the Fed’s earlier view, which had been that rates may remain high for a long time because of concerns about completely reining in inflation. The central bank is prepared to use measures to assist economic development, as shown by the most recent statements, which point to a move towards a more accommodating policy.

The Fed’s dovish statement from yesterday has created the conditions for a shrewd Santa Claus bounce in the next days. It may even spark a pre-election rally that propels the markets to yet another round of record highs. The Fed’s statement from yesterday suggests that three rate cuts in 2024 are feasible and that the tightening cycle is over. The market anticipates four. Numerous indexes will set new marks as a result of the Dow’s record-breaking rise. Large capital flows to India would result from the US 10-year yield’s collapse below 4%, according to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

He thinks the large caps, especially the decently priced large caps in banking, will be the biggest winners. IT could also draw purchases. Retail euphoria has the potential to boost mid-and small-cap stocks as well, but Vijayakumar said that there is no valuation comfort in this market.

Let’s see what other specialists have to say about the most recent US Federal Reserve policy:

For the third time in a row, Dhawal Ghanshyam Dhanani, Fund Manager at SAMCO Mutual Fund, the Fed maintains its “temporary pause” stance on interest rate hikes while hinting that rates may not need to be raised again following months of aggressive tightening and a bias towards moving rates higher. The Fed has taken a more aggressive approach to policy easing in a dovish turn of events, adopting the maxim “don’t fight the markets.”

Officially, committee members have projected at least three rate reductions for 2024, based on quarter-percentage-point increments. Even while this is less than the four cuts that the market had been expecting, it is still a big shift from the Fed’s prior cautious stance.

As an organization that has always been reluctant to declare war on inflation, the new predictions and altered statements represent a significant shift in viewpoint and tone. Still, we must proceed with prudence, should this change result in an early victory parade, should the Fed release its hold on the economy too soon.

TIW Capital’s CEO, Mohit Ralhan
The Federal Reserve has made significant strides in reducing inflation without inflicting significant harm on the economy. Nevertheless, given that core inflation is still at 3 percent—much beyond the central bank’s target—there is still an opportunity for improvement. Additionally, wage growth exceeds the inflation target’s consistency. This implies that more tightening is still theoretically possible, albeit it is unlikely.

The FOMC seeks to be ahead of the curve by considering the risks to growth from higher rates, given the delays in the transmission of monetary policy. If the Fed does not adjust policy, real rates may become excessively restrictive as inflation declines.

The conclusion of the meeting implies that FOMC members will keep a close eye on any decline in mood indicators or economic data in addition to the trajectory of inflation.

Technical Perspective
The founder and CEO of SAS Online, India’s Deep Discount Broker, is Shrey Jain.
The market has already priced in a rate pause after the Fed meeting. But at the press conference, Chairman Powell’s remarks drew the most attention. The US Federal Reserve’s dovish stance set off a worldwide market boom, and Indian markets followed suit. The NSE Nifty and the BSE Sensex both jumped to all-time highs, rising by more than 1 percent. The Nifty was close to 21,160, while the Sensex gained 850 points.

Both locally and internationally, optimism is high, with the Nifty likely to break over 21,050 and the Bank Nifty above 47,600. A strong support range for the Nifty is located between 20,925 and 21,025 on the day of the Weekly Expiry. Given that the Nifty opened above its highest Call base at the 21,000 Call strike, a climb above 21,300 levels is anticipated, propelled by short covering.

Gold
Lower borrowing rates, according to Colin Shah, MD, of Kama Jewelry, are encouraging for the gold, gem, and jewelry industries as a whole. Gold has been rising to new heights, and the positive trend is anticipated to continue.

“Despite the dovish rhetoric, the US Federal Reserve maintained interest rates on hold. In particular, the suggestion that rates may be lowered as early as next year and much later. The fact that economic indicators are on track is the sole warning. Gold prices will rise as a result of geopolitical unrest and a halt in global economic expansion. We anticipate that the demand trend will continue to be strong on the home front. It is anticipated that the current wedding season will maintain a strong level of demand for gold and jewelry,” he said.