The Party On D-street Continues Even As Fed Hikes Interest Rates; Here’s Why
Indian equity benchmarks continued their rally on Thursday even as the US Federal Reserve raised interest rates. The gains come on the heels of a global market rally after the rate hike announcement. Also, progress in cease-fire talks between Russia and Ukraine and softening crude oil prices kept investors’ sentiment high.
The 30-share pack Sensex rose 1,047 points or 1.84 per cent to end at a one-week high of 57,864. Its broader peer NSE Nifty50 also jumped 312 points or 1.84 per cent to close at 17,287.
Nifty and Sensex posted weekly gains of 3.95 per cent and 4.17 per cent, respectively. The markets will be closed on Friday for a holiday.
What’s behind the positive sentiment even after Fed’s rate hike?
On Wednesday, the Federal Reserve announced a rate hike by a quarter percentage point and above that signalled six such hikes later in the year. Such a hawkish stance was expected to dent investors’ sentiment, but that didn’t happen on Thursday. A key reason for this is Fed Chair Jerome Powell’s statement that the US economy is “very strong” and can handle monetary tightening. This single statement calmed global markets to a great extent. Moreover, the fact that the Fed laid out that there would be six such hikes in the coming year cleared a lot of uncertainty among investors.
“Markets were in a sublime touch as rally across global indices gave a major fillip to local gauges. Major negative factors behind the recent crash are slowly on the wane, which is helping the markets to rejuvenate,” said Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities.
Lower oil prices that allayed inflation fears, progress in Russia-Ukraine talks, and further easing of COVID-19 curbs amid an expanded vaccination drive for children also lifted investor appetite this week.
“All sectoral Indices ended in green during the week. BSE Auto and BSE Realty were top gainers gaining around 5 per cent each. While BSE Power and BSE Metal were the lowest gainers gaining less than 1 per cent. Bank Nifty gained around 5.75 per cent. Rest of sectoral Indices gained between 1 to 3 per cent,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.
In Mumbai trading, the Nifty Financial Services Index added 2.77 per cent. Non-banking financial firm HDFC climbed 5.4 per cent to be the top percentage gainer in the Nifty 50.
“On the technical front, the support for Nifty has now shifted to 17000 from 16800 and as long as the index is holding 17k level the uptrend wave will continue till 17450 and could lift the index up to 17600. However, 17000 could be the sacrosanct support level for the Nifty and close below the same could see Nifty hitting 16900-16800 levels,” said Athawale.
Shares of Future Group firms fell between 7.6 per cent and 14 per cent due to regulatory woes of the group's flagship company - Future Retail - regarding its proposed sale of retail assets to Reliance Industries.
(With inputs from Reuters)
