Indian benchmark indices jumped to near two-month highs on Thursday, lifted by gains in non-bank lender Bajaj Finance after its quarterly earnings beat expectations, and as the US Federal Reserve hiked rates on expected lines. At 12:30 pm, BSE Sensex was up over 1,000 points and the Nifty50 was quoting above 16,900. The BSE m-cap was trading Rs 2.8 lakh crore higher at Rs 262.53 lakh crore from Tuesday’s Rs 259.71 lakh crore mark.
Furthermore, in July, the benchmark indices Sensex and Nifty surged nearly 5 per cent each in July, their biggest gain in 11 months. The Sensex and Nifty advanced 5.4 per cent and 4.5 per cent in July, their maximum gains since last August. This was also the first time in four months that both indices turned positive.
Key Factors Behind Today’s Market Rally
US Fed Rate Hike: The US Federal Reserve raised interest rates by 75 basis points against an expected hike of 100 bps on Wednesday. Further to the announcement, the American central bank gave the future interest rate guidance in the range of 3 percent to 3.5 percent. Analysts said the Fed, through its commentary, has made markets believe that this interest rate upcycle may not last long contrary to what was anticipated. This may have positive implications on equities globally, they feel.
Parth Nyati, founder, Tradingo, said: “US Fed announced a 75 Bps rate hike yesterday which was in line with the market expectations. We believe that the Indian markets have already priced in the hike and the impact is going to be minimal. However, the market expects the rates to stabilize around the 3 per cent levels by the year-end and any negative surprise could be perilous for the global as well as Indian economy.”
FIIs Return
Analysts said that the markets were extremely oversold with foreign investors selling nearly $28.70 billion so far this year. The selling pace of the FIIs reduced in July. The foreign institutional investors had net sold Indian stocks worth $146 million this month compared to more than $6.34 billion in June.
Strengthening Rupee
The rupee appreciated 14 paise to 79.77 against the dollar in early trade on Thursday, tracking the overnight weakness in the greenback. Weakness in the dollar increased appetite for risky assets such as emerging markets like India. A rupee appreciation is seen to attract foreign inflows as it adds to the return for foreign investors.
“We expect the dollar index to remain and if it slips below 106.40 it could show further weakness towards 106.10-105.85 levels is possible,” said Rahul Kalantri, VP Commodities, Mehta Equities.
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