Thrilling Thursday: Stocks, rupee soar as Fed stimulus stays

The Sensex today surged to a 3-year high and the rupee reclaimed the 61-mark against the dollar as the US Fed unexpectedly kept its stimulus intact, easing capital outflow worries and kindling hopes the RBI will rollback some liquidity-tightening steps tomorrow.
The US Federal Reserve yesterday surprised the market by saying it will continue with its monthly USD 85 billion bond buying programme and wait for more signs of growth recovery.
Joining a global stock rally, the BSE benchmark Sensex soared 684 points to 20,646.64 on buying in rate-sensitive sectors, including banking. Investors were richer by Rs 1.84 lakh crore as 1,430 stocks on the BSE surged.

Foreign institutional investors pumped in a whopping Rs 3,500 crore in stocks today as the Fed's status quo on stimulus makes liquidity available for investing in emerging market assets.
In step with stocks, the rupee, which has strengthened after touching an all-time low of 68.85 last month, zoomed further by 161 paise to end at a one-month high of 61.77.
"The Fed gives some breathing space...Post this, what can be expected from the new RBI Governor Raghuram Rajan is a rollback of some recent steps to curb liquidity in defence of rupee. However, we see no change in repo rates," said Amar Ambani, Head of Research at brokerage India Infoline Ltd.

An interest rate cut is unlikely tomorrow as market participants feel the RBI will be hawkish in its attempt to control inflationary expectations, experts said.

Rajan's predecessor D Subbarao announced liquidity tightening measures in July, including a cap on banks' overnight borrowings, which led short-term rates to spike.
Meanwhile, gold zoomed up by Rs 410 to Rs 30,810 per ten gram in New Delhi on increased offtake by stockists. In other major metros like Mumbai, Kolkata and Chennai, the precious metal rates rose in Rs 270-670 range.
The 10-year government security yield was last trading at 8.17, down from yesterday's closing of 8.37 per cent. The short-term certificate of deposits levels were at 9.80 per cent, down 60 basis points since yesterday.