The Indian stock market opened with strong gains today after the Federal Reserve raised its lending rates by 75 bps to rein in high inflation. Sensex zoomed 489 points to 53,030 and Nifty gained 155 points to 15,847 in early trade today. In the previous four sessions, the Indian equity market closed lower amid weak global cues.
However, US markets ended in the green after Fed raised its key lending rate and signaled more rate hikes were coming to fight inflation.
The Dow Jones Industrial Average rose 303.7 points, or 1 per cent, to 30,668.53, the S&P 500 gained 54.51 points, or 1.46 per cent, to 3,789.99 and the Nasdaq Composite added 270.81 points, or 2.5 per cent, to 11,099.16.
Asian markets followed their US peers today with Japan's benchmark Nikkei 225 surging 1.8 per cent in morning trading to 26,793.19. Australia's S&P/ASX 200 gained 0.4 per cent to 6,627.50. South Korea's Kospi jumped 1.2 per cent to 2,476.61. Hong Kong's Hang Seng shed 0.6 per cent to 21,178.90, while the Shanghai Composite quickly lost earlier gains to inch down 0.1 per cent to 3,301.89.
Share Market Live: Sensex rises over 450 pts, Nifty at 15,850 post Fed rate hike
Buoyed by the positive global cues, Indian markets were also trading in the green. Of 30 Sensex stocks, 27 were trading higher.
RIL, Maruti, ICICI Bank, Bajaj Finance and Infosys were among the top Sensex gainers, rising up to 1.91 per cent in early trade. PowerGrid, Airtel and Nestle India were the only Sensex losers, falling up to 1.17 per cent.
However, the relief rally across global markets post Fed rate hike is unlikely to last long, say experts. Going ahead, investors should adopt a cautious stance and pick quality stocks.
Stocks in news: State Bank of India, UPL, EKI Energy, NBCC and more
Here's a look what else experts said about the outlook for the Indian market in the near term.
Asutosh Mishra, Head Of Research, Institutional Equity, Ashika Group
"Hike of policy rate by 75bps by Federal Reserve show the urgency of containing inflation by the world largest central bank. Fed aggressive action is expected to contain the demand side impact of the inflation and thus we can expect cooling off of the commodity price in general and crude price in specific Any cool off in the crude price is biggest positive for Indian market on both monetary as well as fiscal front. Further, it will help to cool off the inflationary expectations and thus we may see positive impact of same flowing in for India."
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services
"Along with the highest rate hike in 28 years, the Fed chief delivered the clear message that 'we have the tools and resolve to achieve price stability.' Also, the Fed is significantly reducing the size of its balance sheet. This has negative implications for equity markets globally. Any relief rally is unlikely to last long. In India, the sustained FPI selling is an additional headwind.
Investors may follow a cautious investment strategy without taking aggressive bets. Take a long-term view and use dips in the market to slowly accumulate fairly priced high-quality stocks such as leading banks, leading IT, pharma, and select autos. Increase the cash component in the portfolio to exploit any probable sudden changes in outlook and market trend."
AR Ramachandran, Co-founder & Trainer, Tips2Trades
"As expected, yesterday the increase in interest rate by the Federal Reserve indicates that central banks worldwide have been lagging in terms of controlling inflation. In the near term, however, crude oil charts seem more relevant to track than equities to gain a future perspective from hereon. Technically, Nifty needs to close above 15,886 for some kind of relief recovery till 16,150. 15,660 will remain strong support."
Suvodeep Rakshit, senior economist, Kotak Institutional Equities
"The Fed rate hike of 75 bps is in line with expectations. It also provides comfort that the Fed is trying to be ahead of the curve. To that extent, markets will draw confidence from the Fed actions. The Fed's dot plot of expected interest rates by end of the year is now in line with the market's which should help in removing the uncertainty across asset classes. Evolution of the US inflation trajectory will continue to be one of the important factors for the FPIs. The INR will continue to trade with a depreciating bias while being tempered by the RBI's FX interventions. Domestic bonds will be more linked to the fiscal risks and RBI's rate hikes given the inflation trajectory."
Ramkumar Venkatramani, Lead - Investment Advisory, Kristal.AI
"The current spike in inflation, though initially driven by supply crunches, has become stickier and is sustained by a strong job market and further exacerbated by the war in Europe. This spike in inflation in the US and in Europe is forcing the central banks including the US Fed to eye a sharp increase in interest. The anticipation of aggressive Fed action has spooked markets across the world including Asia. Increase in US rates would make it more attractive for yield seeking investors at the expense of emerging markets. More importantly, if the Fed's aggressive action led to a recession in the US, it can quickly spread to other parts of the world, slowing down the global growth rates."
Santosh Meena, Head of Research, Swastika Investmart
"Global markets are witnessing a pullback after a 75 basis rate hike by US Fed. Markets were already factoring in a 75 basis points rate hike after multidecade high inflation therefore if we are seeing a pullback in our Indian market as well however the market is witnessing selling pressure at higher levels. Fed has signaled further aggressive rate hikes and the market is prepared for that while market will look for a trend in inflation from here and if inflation cools off without hurting growth too much then we can expect a relief rally otherwise market will remain sideways with negative bias. The market has also an eye on the Russia-Ukraine war as there are talks for negotiation. Indian economy is still resilient and next month, the Q1 earning session will begin which will be important for the market. Apart from this, monsoon development, rupee, crude oil, and FIIs' behavior will be other important factors."
Manoj Dalmia, founder and director, Proficient Equities
"Amid the inflation surge, Federal Reserve has approved the biggest interest rate hike in more than 27 years. Officials agreed to a 0.75-percentage-point rate rise at their two-day policy meeting that concluded Wednesday, which will increase the Fed's benchmark federal-funds rate to a range between 1.5% and 1.75%. The increase in rate will affect the equity as well as bond markets, broader markets will face sell-offs, the Indian indices and stocks opened a gap up, the move was not unexpected as it was anticipated already there will be a 0.75 bps hike in the interest rates, further, the effect on our markets depends on the steps taken by RBI to curb inflation.
Ravi Singh, vice-president and head of Research, Share India
"After the release of US CPI data which came at 40 year's high, it was most expected that this time Fed will act aggressively in order to curb inflation. However, this also indices a fear of potential plunging the economy into recession. The increase in US rates also raises a major possibility that apart from equity market, other markets like debt and bond market may also see some FIIs outflow anytime soon in India."
Dhananjay Sinha, MD & Head -Strategist , JM Financial Institutional Securities
"Overall, the Fed is still very uncertain about the trajectory of inflation in the near term because of the interplay of acute labour market tightness and global impulses from the Russia-Ukraine war and China's localised shutdowns Expectedly, following the 10-12% erosion over the past week, there has been a mild bounce-back in US and global equities following the event; US benchmarks are up 1.4% following the rout last week, VIX index has eased and dollar index at 104.74% has weakened by 0.8% and US 10 year has softened a bit to 3.32% (-0.16 bps). But this could just be a relief rebound."
Kunal Valia, Chief Investment Officer - Listed Investments, Waterfield Advisors
"75 bps fed hike sound byte is just ripping through bonds in the US.and ofcourse it's spilling over to Equities. Europe, closing asset purchase program or ending QE coupled with likely rate hike is impacting yields in main markets like Germany,France denting peripheral markets even harder."
Yash Gupta- Equity Research Analyst, Angel One
"US annual inflation for rate accelerated to 8.6 per cent for May 2022. Inflation in the US further heated up as seen in the Friday numbers and considering that inflation in items like energy, housing, transportation etc is not expected to cool off immediately. The markets had already presumed a greater than 50 bps hike by the fed. The reaction was seen in global markets on Monday as global indices down by 2%-4%. As a result, we believe that emerging markets like India would underperform as attractiveness of equity in emerging markets would become less attractive. In the near term, India would be influenced by the FED action."