Domestic benchmark indices Sensex and Nifty hit new highs on Thursday after the US Federal Reserve left interest rates unchanged and hinted at the possibility of three rate cuts in 2024.
The 30-share BSE Sensex opened at a new high of 70,146.09, up 561 points or 0.8 per cent. The index rose 955 points to 70,540 for the first time in morning trade. Nifty opened at a record high of 21,110.4, up 184 points or 0.9 percent.
The US Federal Reserve has kept interest rates stable at 5.25-5.5 percent in its monetary policy. It is also estimated that the historic tightening of US monetary policy over the past two years is coming to an end and low borrowing costs will be reached in 2024, Reuters reports.
VK Vijayakumar said, “The clearly dovish message from the Fed yesterday has set the stage for a smart Santa Claus rally in the coming days, and it could also trigger a pre-election rally that could take the markets to new highs.” Could.” , Chief Investment Strategist at Geojit Financial Services.
The Fed message implies that the cycle of tightening is over and three rate cuts are possible in 2024. The market expects four. The record-breaking rally in the Dow will push many indices to new records, he said.
“Fed members’ rate expectations for December 2024 are 4.6 percent, compared to 5.1 percent in the previous dot plot. The market is estimating an 85 per cent chance of a rate cut in March, up from 40 per cent before the policy, and close to a 100 per cent chance of a rate cut in May, up from 75 per cent before the policy,” he said. IFA Global Research said in a note.
A fall in US 10-year yield to 4 per cent will trigger large capital flows into India and the main beneficiaries will be large caps, especially highly valued large caps in banking.
“Retail enthusiasm could also lift mid and small caps; But there is no valuation comfort in this segment,” Vijayakumar said.
Foreign portfolio investors (FPIs) have invested Rs 33959 crore in the domestic equity market so far in December.