Joining other emerging markets, Indian markets on Thursday staged a rally after the US Federal Reserve said it would lift its benchmark interest rate from near zero for the first time since December 2008. The benchmark Sensex rose for the fourth straight day as it closed over 309 points up at 25,803.78, its biggest single-day gain in about a month.
The rupee also surged by 31 paise to a three-week high of 66.42 against the US currency after the US Federal Reserve’s decision to hike interest rates led to dollar selling. It had crossed the 67 level earlier this week. The rupee, unlike other emerging market currencies, has benefited from the rout in the commodity prices. The rupee depreciated nearly 4 per cent since mid-October as the markets priced in the rate hike by Fed, said Kishore Narne, associate director, Motilal Oswal Commodities.
Meanwhile, The 50-share NSE Nifty recaptured the 7,800-mark by surging 93.45 points, or 1.21 per cent, at 7,844.35. Global equities climbed after the US Fed hiked rates by 0.25 per cent, indicating that the largest economy in the world is strengthening. Japan’s Nikkei Stock Average gained 1.6 per cent, Australia’s S&P/ ASX 200 rose 1.5 per cent and South Korea’s Kospi by 0.4 per cent. The Shanghai Composite Index rose 1.8 per cent and Hong Kong’s Hang Seng Index gained 0.8 per cent.
The BSE metal index gained the most by surging 2.46 per cent, followed by power 1.44 per cent, healthcare 1.39 per cent and auto 1.33 per cent. The small-cap index rose 1.72 per cent and mid-cap 1.56 per cent.
Shanti Ekambaram, president (consumer banking), Kotak Mahindra Bank, said: “The Fed action of increasing rates by 25 bps has lifted the uncertainty and the relatively dovish tone is positive for global markets. For India, which is a part of the emerging markets, impact will be more gradual, based on future pace of hikes. Given that ECB is pursuing an easy monetary policy global liquidity is still likely to be balanced. Thus, markets will now focus on domestic fundamentals including the Budget, which will outline the fiscal roadmap for next year.”
“There could be pressure on currencies of emerging markets as we progress into 2016. However, in India, the central bank has sufficient reserves to counter any volatility and maintain stability,” she said. For months, expectations of higher US rates rattled markets. Foreign investors have pulled out nearly Rs 5,855 crore from the Indian market since the beginning of December on worries of an interest rate hike by the US Federal Reserve.