Sensex surges 300 points as US rate hike fears ease

Indian markets on Tuesday recorded a late surge after speculation of an earlier-than-expected interest rate increase by the US Federal Reserve eased. Most other Asian markets rose on hope that weak economic data in the US would prompt the Fed to delay a rate rise. The benchmark BSE Sensex ended at 28,736.38, up 298.67 points, or 1.05 per cent, the most since February 27. The broad-based National Stock Exchange Nifty ended at 8,723.30, a gain of 90.15 points, or 1.04 per cent.

The MSCI index, which tracks the performance of Asia-Pacific stocks (excluding Japan), rose 0.7 per cent on Tuesday.

Last week, the Indian market had declined about three per cent, owing to global-risk off trade, triggered by concern a rise in interest rates in the US would lead to exodus of foreign funds from emerging markets.

A two-day rate-setting meeting of the US Fed's Federal Open Market Committee is scheduled to begin on Tuesday. Most experts believe at the meeting, the Fed will provide a signal on the first interest rate increase since 2006. Analysts feel removal of the word "patient" from the Fed's formal policy statement could spook markets.

"A positive global market, ahead the crucial FOMC meeting, added to the positive sentiment. The market is looking forward to the land and coal Bills being passed in the ongoing Budget session," said Vinod Nair, head (fundamental research), Geojit BNP Paribas Financial Services.

On Tuesday, foreign investors bought shares worth Rs 266 crore, showed provisional data provided by exchanges.

Experts said the recovery in the market was also due to technical factors, adding there could be more upside in the coming sessions, with the benchmark Nifty expected to gain about 100 points. "The markets are at a short-term bottoming out formation and are ready to retrace the recent sell-off, between 9,120 and 8,610. Technically, we can expect at least 8,840 on the higher side," said Shrikant Chouhan, head (technical research), Kotak Securities. Chouhan said the markets were pricing in delay in a rate increase in the US.

The overall mood, however, remained cautious, with the broader market underperforming the benchmark indices. Among Sensex components, Hindalco and Sterlite Industries were the biggest gainers, at 5.75 per cent and four per cent, respectively. Among those that lost, Infosys declined about a per cent, while Coal India ended down 0.8 per cent.

So far this year, the Sensex has gained 4.5 per cent, primarily due to foreign institutional investor flows of about $5 billion.