Benchmark indices Sensex and Nifty snapped a two-day losing streak, climbing nearly 1 per cent each amid rising hopes that the US Federal Reserve is done with its rate hikes. While the US central bank was largely seen holding on to the policy rate and maintaining its guidance for potential “additional policy firming,” the policy message is becoming “more two-sided,” which was welcomed by the market.
"The statement did add that “financial” as well as credit conditions should weigh on the outlook, and in his presser, Chair Powell acknowledged the Fed is monitoring how long tighter conditions might persist. Owing to this, yields fell and stocks rose while dollar weakened too," Madhavi Arora Lead – Economist at Emkay Global Financial Services pointed.
So the Fed commentary, its impact on dollar and bond yields, a resultant rally in Asia, rupee appreciate and ease in foreign outflow concerns and rupee, in addition to as healthy earnings at home, helped stocks rally today.
Fed commentary, Wall Street gains
Edward Moya, Senior Market Analyst, The Americas at OANDA said the Fed tried to deliver a hawkish hold but Wall Street is not believing additional tightening will happen this cycle. The odds for a quarter-point rate rise by the end of January fell from 41 per cent to 29 per cent, he noted.
"Fed Chair Powell tried to talk a hawkish game, but it wasn’t convincing enough. The Fed’s September dot plots and forecasts are already in the trash and it seems likely that the next move will be a rate cut," he said.
Sensing this, Dow Jones climbed 222 points or 0.67 per cent to 33,274.58 in overnight trade. S&P500 was in fact up 44 points or 1.05 per cent at 4,237.86. E-mini S&P 500 index futures were also up earlier today.
US 10-year bond yields ease
Following the Fed's commentary, benchmark US 10-year treasury yield eased 2 basis points to 4.7089 per cent, the lowest in more than two weeks.
Overnight, a Reuters report suggested, yield tumbled 14 basis points, the biggest daily drop since March, also in part due to a treasury announcement that said the US government would slow increases in the size of its longer-dated auctions.
"The US Fed has taken a sensible approach by keeping interest rates unchanged for the second consecutive time, raising hopes of pivot by market participants. Wait and watch is what the US Fed is doing and so should the investors," said Dhawal Ghanshyam Dhanani, Fund Manager at SAMCO Mutual Fund.
Asian markets rally
With US stock futures showing positive reading, Asian markets across Asia rallied. The MSCI's broadest index of Asia-Pacific shares outside Japan, which captures four of five developed markets countries(excluding Japan) and eight emerging markets countries in the Asia Pacific region, surged 1.73 per cent to the highest level in a week. Nikkei surged 1.4 per cent to hit the 32,000 level but cut gains. It was up 0.96 per cent at 9.55 am. Hong Kong's Hang Seng climbed 1.21 per cent but China's Shanghai Composite edged 0.11 per cent higher.
Rupee recovers, FPI outflow concerns ease
The Fed commentary helped the rupee appreciated 9 paise to 83.19 against dollar in early Thursday trade. It also helped eased some concerns over foreign outflows. Data showed FPIs dumped Rs 24,548 crore worth domestic equities in the month gone by. This was against Rs 14,768 crore outflows in August, even as many global brokerages are 'overweight' on India.
Q2 earnings stable so far
Q2FY24 earnings season so far has not provided any major negative surprises with cyclicals driving profit growth, while defensives lag, ICICI Securities said in a strategy note.
"Earnings growth for NSE200 universe so far in Q2FY24 remains robust at 31 per cent (excluding HDFC Bank) which dovetails with our expectations of a rising PAT/GDP upcycle. Also, earnings beat are exceeding misses (Beats – 29 , Neutral – 21, Miss – 26)," the brokerage said.
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