 "Markets defy US Federal Reserve rate hike: Touch five-month high")
India’s markets closed at their highest in nearly five months, even as the US Federal Reserve (Fed) raised interest rates by 25 basis points. Most global markets traded mixed, following comments from Chair Jerome Powell signalling a pause in June. He, however, played down the prospect of rate cuts later in the year. The weakness in the US dollar helped boost sentiment towards emerging markets.
The benchmark S&P BSE Sensex ended the session at 61,749, with a gain of 556 points, or 0.9 per cent.
The National Stock Exchange Nifty closed at 18,256, up 166 points, or 0.9 per cent. The latest close for both indices is the highest since December 19. The Sensex — which has gained in nine of the previous 10 trading sessions — is now just 2.4 per cent away from its all-time highs. The Sensex recorded a lifetime high of 63,284 on December 1.
Investors in the developed world were concerned about the Fed’s projections of a mild recession and Powell’s statement that it won’t be a smooth process to achieve the Fed’s inflation target of 2 per cent.
Investors were also disappointed about a lack of clarity from the Fed as regards resolving the banking crisis in the US.
Since March, California’s Silicon Valley Bank and New York’s Signature Bank have seen heavy deposit outflows, prompting the Fed to launch an emergency lending facility to restore confidence in the banking system.
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Although the Fed’s measures quelled fears at the time, the strain resurfaced with troubles in First Republic Bank raising fresh questions about how long to keep interest rates elevated.
The gains in domestic markets were propelled by the HDFC twins — HDFC Bank and HDFC Ltd — and Reliance Industries (RIL). Positive quarterly earnings and healthy macroeconomic (macro) data further kept investor sentiment buoyant. The manufacturing Purchasing Managers’ Index (PMI) rose to 57.2 in April, from 56.4 in the previous month.
PMI has been above 50 for 22 straight months. A print above 50 signals expansion.
Likewise, the goods and services tax collection in April was the highest monthly mop-up since the scheme was rolled out. The overall market capitalisation of the BSE-listed firms rose by Rs 30,000 crore.
“Healthy fourth-quarter earnings and strong buying by foreign institutional investors in the last five days provided the much-needed support to the market. Key domestic macro data has also been encouraging. The overall market structure remains positive, with the Nifty slowly and surely gaining strength over the past few weeks,” says Siddhartha Khemka, vice-president (V-P), head-research (Retail), Motilal Oswal Financial Services.
Investors will be keenly tracking the US initial jobless claims and non-farm payroll for further cues.
“The surge in the index shows more leg to the prevailing upmove before it settles for some consolidation. Apart from consistent buying by the banking and finance majors, the rotational participation from other sectors is fuelling recovery now. We, thus, recommend aligning positions with the trend, focusing on stock selection,” says Ajit Mishra, V-P, technical research, Religare Broking.
The market breadth was strong, with 2,211 stocks advancing and 1,309 stocks declining. The Nifty Midcap 100 gained 0.6 per cent, while the Nifty Smallcap 100 rose 0.8 per cent.
Bajaj Finance was the best-performing Sensex stock and the biggest contributor to index gains after the HDFC twins and RIL. Bajaj Finance ended the session up at 3.4 per cent.
Foreign portfolio investors (FPIs) bought shares worth Rs 1,414 crore, according to provisional data from exchanges. So far, FPIs have been net-buyers to the tune of Rs 10,850 crore in May.