The Indian stock market extended gains on Thursday after the US Federal Reserve left its key interest rates unchanged, although a growing number of policymakers indicated a rate hike later this year.
Sensex rose around 274 points to close at 77,928 while Nifty gained around 67 points to end the session at 24,317. Broader markets, however, ended the session in the deep red, with Nifty Smallcap 100 and Nifty Midcap 100 indices falling up to 0.6%.
Maruti Suzuki, M&M, Reliance Industries, SBI, HDFC Bank and Power Grid shares rose 1-2% to lead gains on Sensex, while Adani Ports plunged more than 3% to lead losses. Sectorally, Nifty Auto jumped around 2% to lead gains, while Nifty Realty tumbled more than 2%.
The overall market breadth favoured the bears, with NSE seeing 1,975 declines against 1,326 advances, while 118 stocks remained unchanged on Thursday.
Fed keeps rates unchanged
The US Federal Reserve left its key interest rate unchanged as expected after its FOMC meeting on Wednesday, but the American central bank’s chair Kevin Warsh pledged an unwavering commitment to bring inflation down, leaving investors confused.
Markets are now pricing in a 63% chance of a rate hike in September, down from about 81% before the policy decision, according to CME Group's FedWatch tool. However, three regional Fed bank presidents who dissented had previously called for or signaled that they would be open to raising rates to combat high prices.
What lies ahead?
The Indian market construct indicates a breakout trend, but the potential breakout is being constrained by many headwinds, VK Vijayakumar, Chief Investment Strategist at Geojit Investments noted. He highlighted that the spike in Brent crude again to near $90 following the escalation of the US-Iran conflict is a strong headwind.
“Feds decision to pause rates yesterday, though expected, turned out to be negative for equity markets since the decision was a 9-3 split decision with three members voting for a rate hike to control inflation. This split decision indicates that a rate hike may come soon. Consequently bond yields increased impacting equity markets which saw a 2% sell off in S&P 500,” the analyst said.
The Indian market is likely to respond differently since the sell off in chip stocks and FPIs turning buyers in India, so far in July, are turning favourable for the Indian market, he said. South Korea’s Kospi is down 31 % during the last one month and FPIs have turned big sellers in chip stocks. “Indian economy continues to be resilient and this will provide fundamental support to the market,” the analyst added.
Technical view on Nifty
The Indian stock market has entered a volatility zone, but a complete trend reversal is less expected right away, said Anand James, Chief Market Strategist at Geojit Investments. He noted that the favoured view sees 24,190-24,145 region absorbing weakness, and support upswing attempts during the day.
Nifty’s direct fall below 24,085 could however lend momentum to downside attempts, according to the analyst.
(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
