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Domestic equity markets surged around one per cent Thursday tracking Asian stock markets after the US Federal Reserve hinted at softening its rate hike stance.
On Wednesday, the US central bank raised its benchmark overnight interest rate by a quarter of a percentage point to the 5-5.25 range, as expected by financial markets, but in doing so dropped from its policy statement language saying that it “anticipates” further rate increases would be needed.
The 30-share BSE Sensex rose 556 points, or 0.91 per cent, to end at 61,749.25 on Thursday. The broader Nifty surged by 166 points, or 0.92 per cent, to finish at 18,255.8.
Gold prices rallied to a record high of Rs 61,412 per 10 grams on a possible rate hike pause by the US Federal Reserve in its next meeting, analysts said.
“Following a widely expected rate hike by the Fed and consistent foreign support, the domestic equities resumed their bullish momentum, driven by gains across major sectors,” Geojit Financial Services Head of Research Vinod Nair said.
Kotak Securities Ltd Head of Equity Research (Retail) Shrikant Chouhan said with India’s growth indicators showing good signs of revival and crude oil prices staying lower, investors are betting big on local equities even as a haze over global economic growth persists.
Market participants said the surge in gold prices was supported by weakness in the dollar as investors bought gold on safe-haven appeal amid rising risks of recession in the US.
The positive sentiments among investors triggered a fresh bout of buying in banking stocks.
Bank Nifty index rose 372.75 points, or 0.86 per cent, to end at 43,685.45.
The top gainers on Nifty 50 were Adani Enterprises, Bajaj Finance, HDFC Ltd, SBI Life Insurance and HDFC Bank while the top losers were IndusInd Bank, Nestle, Power Grid and ITC.
Foreign portfolio investors (FPI) net bought Rs 1,414.73 crore of shares from the domestic market, according to the BSE’s provisional data
Market participants said the surge in gold prices was supported by weakness in the dollar as investors bought gold on safe-haven appeal amid rising risks of recession in the US.
“The interest rate decision by the US Fed and the commentary which came after that has led to the rise in gold prices,” Commtrendz Research’s Co-founder and CEO Gnanasekar Thiagarajan said
In FY2023, gold prices jumped by a massive Rs 8,000 in the domestic markets from Rs 52,000 to Rs 60,000 per 10 grams, giving a 15 per cent return.
“Going ahead, gold still looks lucrative in terms of ROI (return on investments) from a safety perspective where the inflation remains high globally and the interest cycle, which is yet to ease, will also provide the push needed for gold to run and give 10-15 per cent return in FY24,” LKP Securities VP (research analyst) Jateen Trivedi said.
He expects gold prices to touch Rs 66,000-Rs 68,000 per 10 grams on base case performance before the end of FY24.
The rupee closed 2 paise up at 81.78 against the US dollar on Thursday as compared to the previous close of 81.80.
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