India’s benchmark Sensex on Thursday surged 283 points and closed above the 27,000 level after the US Federal Reserve kept the interest rate unchanged and the above-normal progress in monsoon and strengthening of the rupee added to the bullish fervour. The rupee also strengthened by 39 paise to 63.73 against the dollar amid expectations of resumption of foreign capital inflows in view of a sustained rise in the equity market.
The index, ignoring weak global cues, opened on a strong footing, picked up momentum on sustained across-the-board buying, touched a high of 27,175.39 and finally settled 283.17 points higher or 1.06 per cent at 27,115.83. The 50-share NSE Nifty index recaptured the 8,100-mark by rising 83.05 points or 1.03 per cent to close at 8,174.60.
The Sensex has gone up by 745 points in the last five sessions and now stands at over two-week high levels.
US Federal Reserve chairwoman Janet Yellen left key interest rates unchanged near zero. “It did not give any major hints about the future trajectory of interest rates and more importantly, on the timing of the first rate hike. These slightly dovish comments came in along the expected lines. The Fed said the economy is expanding moderately. It also hinted, it will wait for further improvement in the labour market and for higher confidence that inflation would rise, before making any decision on hiking the rates,” said Kamlesh Rao, CEO, Kotak Securities.
The US Fed also downplayed the importance given to the first rate hike and advised looking at the longer term trajectory of hikes in the future. It seemed to indicate that the first rate hike does not mean consistent rate hikes in future quarters. “There is a possibility of a pause in rate hikes. For India, this is positive, primarily from the perspective of fund flows. A gradual rate hike is already discounted by the markets, except for a temporary impact at the time of the first hike. At the same time, a very strong pickup in the first pulse of monsoon augurs well for the economic growth as well for the disinflationary trend in the economy,” Rao said.
RIL topped the list by climbing over 5 per cent on continued optimism about the company’s plans to start 4G phone services later this year. Gains were also aided by oil & gas, consumer durable, healthcare, auto, capital goods and banking stocks.
According to analysts, the Greece issue and the progress of monsoon will be the trigger in the immediate term. A strong pickup in the first pulse of monsoon augurs well for the economic growth as well for the disinflationary trend in the economy. “We also expect Greece and its creditors to find a solution to the current impasse. Over the medium term, markets will watch the government’s efforts on kick-starting stalled infrastructure projects and new project awards. Passage of the Constitutional Amendment Bill for GST as well as further progress on Land Acquisition Bill would also be key triggers for the markets over this period,” said an analyst.
On the rupee, analysts said the RBI is eager to accumulate more foreign exchanges, as an insurance against large foreign currency investments and obligation and also at the same time, not allow the rupee to become too strong that it hurts export competitiveness. “Hence, we may continue to see the central bank intervene to keep the US dollar supported between 63.00/63.30 levels on spot,” said an analyst.