Markets clock highest percentage gain since early October on US Fed stance

Fed hinted at a possible rate hike in December after which it would proceed with caution on further tightening

Indian Indian equity markets on Thursday registered their highest single-day percentage gains since early October on across-the-board buying, tracking a global rally. World stocks jumped after the Wednesday release of the minutes of the US Federal Reserve which suggested that the US central bank would likely hike interest rate in December, and only gradually after that.
 
Overnight, Wall Street jumped on the confidence about the health of the world’s largest economy. The Fed’s hint that it would subsequently adopt a go-slow approach on monetary policy tightening only aided the sense of exhilaration across the financial world.

In India, the S&P BSE Sensex ended at 25,841, up 359 points, while the Nifty50 settled at 7,842, up 110 points. Both the benchmark indices ended 1.4% higher, the largest single-day percentage gain since October 5.

“The week was of a tumultuous nature as markets saw alternate bouts of positive and negative close amidst global market cues and developments,” noted Ranak Merchant, technical analyst (strategies) at Sushil Financial Services. “The lows appear to be arrested near 7700 levels while 7850 on the upside offers a stern resistance. With the next week being a truncated one yet again and with F&O expiry, volatility would be in the higher end.”

Laying out the levels to watch out for, Merchant recommended watching for “… a close above 7850 for a rally towards 8050-8100, while support continues to be in the 7691-7723 zone. With short term oscillators in the oversold zone, any dips towards the said supports could be used to generate fresh longs with a stop loss of 7650.”

All Asian equities, too, ended in green territory. Japan’s central bank has maintained its monetary position, citing confidence in the economy despite challenging conditions, which includes a second bout of recession. The Nikkei is up by 1%. Other Asian markets – FTSE Straits Times, Hang Seng, and the Shanghai Composite – have all surged between 1.3% and 1.5% each.

European equities also opened positively, shrugging off security concerns in France, as the FTSE 100, CAC 40, and DAX all climbed up by 1%. 

TRENDING STOCKS

In a firm market, Dr Reddy’s Lab was the outlier, plunging as much as 7% in opening trade; the stock recovered somewhat but still managed to end 2.2% down. The pharma stock has been in a soup since the US FDA raised quality issues at three of its manufacturing firms in India. Additionally, at least two California-based legal firms on Wednesday accused the company of fudging financial statements in its filings to the US Securities and Exchange Commission.

Sarabjit Kour Nangra, vice president (research-pharma) at Angel Broking, however, maintained the stock would come through unscathed.
 
“Lundin Law PC announced it is investigating claims against Dr. Reddy’s Laboratories Ltd concerning possible violations of federal securities laws. However, currently we don’t think there are any major immediate financial implications of the same and hence, we maintain our numbers and BUY rating with a price target of INR 3933,” she said. 

Another stock that hogged the limelight in early trades today was Hero Motocorp. The stock gained by nearly 1%. The world’s largest motorcycle maker by volume announced that it clocked over one million units in retail sales over the festive season. A lowering of interest rates and drop in crude oil prices also seem to have helped the company, which has made a name for itself with its affordable, highly fuel-efficient bikes. Other auto stocks that jumped today were Bajaj Auto and Maruti Suzuki that ended up between 2-3% each.

In the IT space, Infosys rebounded after suffering losses in past four trading sessions. The stock finished over 2.5%. Infosys’ rising tide also helped its peers such as TCS, Wipro register 0.4-0.5% gains.

Coal India, India’s largest coal producer, was one of the four Sensex stocks, that defied the upward movement, dropping 0.4%, after the government on Wednesday approved a 10% divestment in the state-run company. The stock had seen a broad-based buying interest for the past few sessions, despite weakness in the market.

The Union Cabinet on Wednesday approved a marketing margin of Rs 150-200 a standard cubic meter (scm) to be charged by natural gas retailers such as Reliance Industries and GAIL from urea and for liquefied petroleum gas (LPG) plants. Reliance Industries soared 2.4% while GAIL finished 2.4% higher.