Markets shrug off Fed rate hike fear, surge for 3rd day

Benchmark BSE Sensex ended higher by 173 points, or 0.69%, to 25,494

Shrugging off fear of a possible rate increase by the US Federal Reserve, Indian equities rose for a third straight session, tracking gains in European and Asian markets.

Experts reckon the market here has already discounted a 25 basis points hike, the first such raise in almost a decade. The Fed had taken its target interest rate to zero in 2008, as the US slid into recession. The two-day Fed meet began on Tuesday.

On Wednesday, the benchmark BSE Sensex ended the day higher by 173 points, or 0.7 per cent, to 25,494, while the 50-share NSE Nifty rose 50 points or 0.65 per cent at 7,750.9. In the last three sessions, the Sensex has gained 450 points or 1.8 per cent.

“The benchmark indices ended in the green on the back of firm global cues and recovery in index majors across the board. The impact of the US Fed meet will be felt on Thursday and the initial hour is likely to be volatile,” said Jayant Manglik, president, retail distribution, Religare Securities.

The global sentiment has spurred foreign investors to pull out money from the Indian market. On Wednesday, foreign institutional investors (FIIs) sold shares worth Rs 500 crore, while domestic institutional investors bought shares worth Rs 1,024 crore, provisional data shows. In December, they have sold shares worth more than Rs 3,300 crore, paring year to date purchases to about Rs 14,800 crore.

In August, foreign investors had pulled out a record Rs 17,200 crore from the Indian market; in September, they took out Rs 5,695 crore. This was followed by net purchases of Rs 5,064 crore in October. The Sensex had slid 5.9 per cent in the three months to September, its steepest quarterly loss since 2011.

Key Asian indices ended in the green on Wednesday, with Nikkei 225 and Hang Seng gaining the most at over 2 per cent each. European indices were also trading in the green, with the DAX, FTSE and CAC 40 trading anywhere between 0.4 per cent and 0.7 per cent, respectively, at 5pm India time.

Back home, market breadth was strong with 1,435 advances compared with 1,272 declines on Wednesday. Twenty three out of 30 Sensex components ended in the green. Eight of the 12 BSE sectoral indices ended in the positive territory, with the BSE Telecom rising the most at 2.4 per cent.

Market experts said the government will have to push ahead with its reform agenda to spur growth and revive investor confidence back to ensure India withstands the global turbulence triggered by fears over China slowdown and interest rate increase by the US Federal Reserve.