Fed policy and decreasing oil prices drive the market to all-time highs
On Thursday, domestic equities markets reached new heights. The benchmark indexes, the BSE Sensex and the NSE Nifty50 gained around 1.3% apiece after the US Federal Reserve’s announcement that it would abandon its aggressive approach and decrease interest rates at least three times in 2019.
The Nifty 50 finished at 21,182.70, up 256.35 points, or 1.23%, while the Sensex closed at 70,514.20, up 929.60 points, or 1.34%. As the market capitalization of the BSE-listed businesses increased to Rs 355.10 lakh crore, investors’ wealth increased by Rs 4 lakh crore.
The creator of Tradingo, Parth Nyati, said that the Indian equities market is experiencing a Goldilocks situation due to a combination of local and international factors. “Bullish momentum has been fueled by unwavering political stability, a strong macroeconomic backdrop with robust GDP growth and subdued inflation, and weakening dollar and US bond yields amid expectations of a 2024 rate cut.”
The market upswing was also aided by a decline in crude oil prices, which reduced inflationary pressure, and foreign institutional investors (FIIs). NSE data shows that FIIs purchased stocks on Thursday totaling Rs 3,570 crore. FIIs have made net investments of Rs 39,260 crore in December so far, according to NSDL statistics.
During its most recent policy meeting, the US Federal Reserve kept interest rates between 5.25% to 5.50% and hinted that it might decrease rates three times in 2024. Global equities markets saw a significant uptick as a result of this.
Because developing economies like India have a superior risk-reward situation, foreign institutional investors (FIIs) boost their exposure to them when the Federal Reserve announces rate reduction. The US currency loses strength because to the rate rise, and the returns on safer US bonds become less appealing.
Additionally, when it comes to future interest rate increases and decreases, other central banks take the lead from the Federal Reserve. This suggests that the RBI may possibly implement many rate decreases in the next year, which would facilitate corporate borrowing and boost their profit margins—a major boon to the equities market.
On December 14, there was a peak purchasing activity for IT shares, resulting in a 3.5% increase in the Nifty IT index. Tech Mahindra, Infosys, Wipro, HCL Technologies, IndusInd Bank, Bajaj Finance, Bajaj Finserv, and Mahindra & Mahindra were the top gainers within the Sensex pack. However, the biggest laggards were Maruti, Tata Motors, Power Grid, Nestle, and JSW Steel.
