Sensex scales record highs, Nifty closes at all-time high as Fed minutes indicate slower pace of rate hikes

Minutes of the US Federal Reserve’s last meeting showed that most officials remained in favour of going slow on interest rate hikes, lifting stock market sentiments worldwide.

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Financial services stocks and a few public sector banks hit new 52-week highs on Thursday. In addition, value-buying was seen in IT stocks on the back of attractive valuations and a rally in the Nasdaq index, analysts said.

“Investors wound up short positions on the expiry date, triggered by US Fed minutes indicating a moderate pace of rate hikes going ahead that eventually propelled benchmark indices Sensex and Nifty to new all-time highs,” said Shrikant Chouhan, head of equity research (retail), Kotak Securities Ltd. The falling US Dollar index and bond yields also improved risk appetite and led to broad-based buying, analysts said.

The yield on the 10-year US treasury bond fell to 3.69%, and the dollar index slipped to 106. According to V.K. Vijayakumar, chief investment strategist, Geojit Financial Services, so long as this trend continues, bears will be on the back foot. In India, macro news confirms the economy is resilient, and investment is gaining momentum, Vijaykumar said, adding latest RBI data show credit growth at an impressive 17% year-on-year, which is good for banking and capital goods stocks.

Meanwhile, crude prices softened as Group of Seven (G7) nations pressed for a price cap on Russian oil and as crude oil inventories in the US rose above analysts’ expectations. Brent at $84-85 a barrel has slipped to 10-month lows, levels not seen since early January.

Anindya Banerjee, vice-president of currency derivatives and interest rate derivatives at Kotak Securities Ltd, said the rupee had been an underperformer in the past fortnight, primarily on account of demand for dollars from oil marketing firms and some bids from foreign portfolio investors. However, on Thursday, the rupee closed 21 paise stronger at 81.63, as traders sold dollars after the release of US Fed minutes. The weak dollar and strong risk sentiments can continue to push the rupee towards ₹81.25/30 to a dollar level, added Banerjee, who expects an overall range of 81.25-81.85 in spot markets.

Foreign portfolio investors were net buyers of ₹1,231.98 crore worth of equities on Thursday, provisional data indicated. FPIs have remained net buyers of equities in November.

Global markets rallied on the rate relief, falling US volatility index, and the fall in the Dollar Index and US Treasury yields, said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd. Once the Nifty is able to cross 18,604, Khemka expects the index to inch up towards 19,000 levels.

Markets have reclaimed buoyancy, and the tone is expected to continue, said Ajit Mishra, vice-president of technical research, Religare Broking Ltd. He, however, added participants shouldn’t go overboard and continue with selective buying.