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Bulls pack a 489-point punch as US Fed hints at rate cut

Nifty rises 140 points as market hopes for further rate cuts by Reserve Bank

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Bulls pack a 489-point punch as US Fed hints at rate cut
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After clocking steady gains in the past two trading sessions, key equity benchmark indices extended rally on Thursday, as bulls joined the global markets surge after the US Federal Reserve on Wednesday said it may cut interest rates as early as July.

After a lacklustre opening, the Sensex witnessed a steep fall as selling intensified and slumped 179 points to the day's low of 38933.78. However, the markets bounced back sharply thereafter, taking cues from other Asian indices, and notched up exemplary gains on the back of an upsurge in banking, pharma and automobile stocks.

The S&P BSE Sensex finally closed at 39601.63 surging 488.89 points or 1.25%. Intraday, the index flared up 526 points to touch an intraday high of 39638.64. Similarly, the broader 50-stock NSE Nifty 50 also rose 140.30 points, or 1.2%, to end at 11831.75, after having jumped 152.05 points intra-day to touch a high of 11843.50.

Despite the broad-based rally, foreign institutional investors turned net sellers of equities in the domestic market, offloading shares worth Rs 438 crore, according to a BSE provisional data. On the other hand, domestic institutional investors bought shares worth Rs 1,241 crore.

The US Fed on Wednesday said it is ready to tackle growing global and domestic economic risks with interest rate cuts beginning as early as next month. Hopes of rate cuts could trigger risk-on trade, thus benefitting emerging markets, including India, said dealers. The dollar and benchmark bond yields fell to multi-year lows.

Broader indices, too, were on a roll with BSE midcap and smallcap indices rising 1.64% and 1.05%, respectively. The market breadth was also strong.

Deepak Jasani, head of retail research, HDFC Securities, said the gains came on the back of positive global cues as a dovish US Federal Reserve statement opened the door for rate cuts.

"Advance decline ratio came back to positive on the NSE for the first time in almost four weeks since May 28. This is more a reflection of the return of positive mood among traders even as the recently beaten-down stocks bounced back sharply due to short covering/halt of selling pressure. While the broader market may continue to rally (albeit at a slower pace) the frontline indices may see a much slower rise over the next few days," Jasani said.

Major gainers during the day were YES Bank, Sun Pharmaceutical Industries, IndusInd Bank, L&T, ICICI Bank, and Maruti Suzuki. YES Bank led the pack with 10.94% gains, followed by others, which gained up to 4.01%.

Only four Sensex stocks such as Hindustan Unilever, HDFC Bank, ITC and NTPC ended in red, losing 0.04-0.33%.

Among the 11 sectoral gauges on Nifty, buying was witnessed across sectors, with Nifty Pharma (3.06%) leading the pack, followed by Nifty PSU Bank (2.7%), Nifty Auto (2.49%), Nifty Realty (1.92%) and Nifty Metal (1.86%).

Nagaraj Shetti, technical research analyst, HDFC Securities, said after showing weakness from near the hurdle of 11,780-800 levels in the last session, the Nifty witnessed a sharp upside bounce on Thursday.

"A long bull candle was formed and the broad-based buying was seen in beaten-down stocks in Thursday's session. Technically, this pattern signals a sharp comeback of bulls from the lows. The short-term trend seems to have reversed up, a follow-through up-move from here could change the near-term sentiment towards positive," he said.

Besides the Indian markets, other Asian markets also closed on a positive note with China-Hong Kong markets standing out with splendid gains. European indices were also trading in the green and surged to six-week highs, as investors piled into riskier assets after the US Federal Reserve signalled that a new round of monetary stimulus was likely.

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