Sensex, Nifty rally after Fed fuels rate cut hopes

NEW DELHI: Equity benchmark indices Sensex and Nifty ended higher on Thursday driven by gains in auto, metals, realty and power stocks after US Federal Reserve Chairman Jerome Powell's dovish comments rekindled rate cut hopes.

Powell said the US economy was still under threat of a slowdown in his testimony on Wednesday and said the Fed was ready to “act as appropriate", a report stated.

Analysts said that domestic market bounced back amid positive cues from Asian and US equities.

"We are very bullish with the three-month view onwards and we think October onwards we will see the best markets rally in a long time. Use this fall to buy and the pessimism is very much overdone," Sanjiv Bhasin, Executive Vice President, IIFL Securities said.

The Indian markets had slumped after the Budget as investors were disappointed with the proposals to tax share buybacks, impose higher taxes on the super rich and increase minimum public shareholding in listed companies.

Analysts expect investors to turn their attention to the earnings season, which began with TCS and are now awaiting the first quarter results of Infosys and IndusInd Bank on Friday.

On the global front, Asian shares rose after Powell reinforced prospects of a US rate cut while European shares were on course to snap their four-day losing streak. MSCI's broadest index of Asia-Pacific shares ex-Japan rose 1 per cent while Japan's Nikkei added 0.5 per cent.

Meanwhile, the rupee strengthened against a sagging US dollar along with other emerging market currencies after Federal Reserve chief’s comments.

However, rising crude oil prices capped the gains.

The rupee opened at 68.31 a dollar and was trading at 68.43, up 14 paisa from its previous close of 68.57 at 03:42 pm.

BSE Sensex closed 266.07 points or 0.69 per cent higher at 38,823.11 while NSE Nifty ended at 11,575.60, up 76.70 points or 0.67 per cent.

Market at a glance
In the 30-pack Sensex, 23 stocks ended in the green and seven in the red with Tech Mahindra as the worst performer and Hero MotoCorp best. ICICI Bank, Axis Bank, L&T and TCS too joined Tech Mahindra on the losers list, slipping up to 2 per cent.

IndusInd Bank, Vedanta, Tata Motors and SBI were among other Sensex stocks that advanced.

The BSE Midcap index advanced 0.56 per cent and the BSE Smallcap index ended 0.41 per cent higher underperformed benchmark Sensex.

BSE Auto index recorded gains of 1.84 per cent followed by Metal, Realty and Telecom index.

In terms of index contribution, HDFC twins, IndusInd Bank, SBI and Infosys were the top support while ICICI Bank, TCS, L&T and Tech Mahindra were the top drag on Sensex.

Expert Take
"We expect the market to remain choppy in the near term in the backdrop of weak domestic cues. Given the economic slowdown we expect the earnings season to be tepid, which will lead to stock specific volatility. Further, CPI inflation and IIP data (scheduled tomorrow) will provide direction to the markets. On the global front, on-going geo-political issues between US and Iran as well as crude oil prices and currency movement will keep the market participants on edge"
- Ajit Mishra Vice President, Research, Religare Broking

"US rate cut hopes seem to be back and bolstered equities across the globe, including India. Slide in 10-year yield and strength in the rupee despite surge in oil prices may ease investors’ concerns over liquidity. Further gains going ahead are expected to be limited as the market seems to be in a high valuation trajectory. Investors to await fresh triggers and wait for Q1 FY20 results announcement which is expected to be subdued"
- Vinod Nair, Head of Research, Geojit Financial Services