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Domestic stock market indices Sensex and Nifty opened at all-time highs on positive investor sentiments after the US Federal Reserve cut its interest rates by a huge 50 basis points (bps).
The BSE Sensex gained 410.94 points, or 0.50 per cent, to open at a record high of 83,359.17. The broader Nifty 50 climbed 109.5 points, or 0.4 per cent, to open at a new high of 25,487.05.
“The big Fed rate cut by 50 bps has the potential to take equity markets into a consolidation phase with an upward bias. The Fed Chief Jerome Powell’s remark that “we have gained greater confidence that inflation is moving sustainably towards 2 per cent” is a very optimistic commentary of the US economy,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
On Wednesday, the US Federal Reserve lowered its interest rate by 50 basis points (bps), or 0.5 per cent, to 4.75-5 per cent target range. A basis point is one hundredth of one percentage point.
This is the first rate cut by the US Federal Reserve since early 2020. The move shows that the focus of the Fed has now shifted from fighting inflation to supporting economic growth, analysts said.
Prior to the pandemic, the FOMC or the Federal Open Market Committee – the American central bank’s rate setting panel — had last cut interest rates by half a percentage point in 2008, during the global financial crisis.
“US Fed opened the rate cut cycle with a bang with 50 bps cut in line with changed market expectations. From inflation is transitory to higher rates for longer, the Fed has come a long way to meet market expectations. This rate cut will facilitate flows to the emerging market assets with weaker dollar and lower rates,” said Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Committee.
The cut in interest rates by the US Fed was positive for IT stocks. The Nifty IT index gained 462 points, or 1 per cent, to open at 42,551, compared to the previous close of 42,089.30.
Among the NSE companies, the stocks that gained the most included NTPC Ltd (2.72 per cent), LTIMindtree Ltd (2.2 per cent), Wipro (1.96 per cent), Tech Mahindra (1.43 per cent) and Bajaj Finance (1.31 per cent).
