US Federal Reserve rate cut hopes lift markets for fourth consecutive day

Benchmark indices up over 5% from recent lows but still trade 12% below record highs logged six months ago

Domestic equity benchmarks rallied over a per cent on Thursday, driven by a boost in investor sentiment after the US Federal Reserve forecasted two rate cuts this year. The Sensex jumped 899 points, or 1.2 per cent, to close at 76,348, while the Nifty 50 index gained 283 points, or 1.2 per cent to end at 23,191.

 

This marks the fourth consecutive day of gains for both indices, their longest winning streak since January end. The total market capitalisation rose by ₹3.6 trillion to ₹408.6 trillion, with a weekly gain of ₹17.4 trillion. From recent lows, the benchmark indices have rebounded more than 5 per cent. They still trade 12 per cent below their record highs logged six months ago.

 

The Federal Reserve's decision to keep interest rates unchanged, while lowering economic growth forecasts and raising inflation outlook, eased concerns about the US central bank's ability to cut rates amid inflationary pressures.

 

Fed Chair Jerome Powell hinted that the inflationary impact of President Donald Trump's trade policy could be transitory. However, he clarified that a temporary rise in inflation due to tariffs is a base case scenario and added that Fed officials "really can't know" if the impact will be temporary or not. 

 

However, some market experts remain skeptical about the temporary nature of this impact. 

The 10-year US bond yield fell over 5 basis points to 4.18, reducing the attractiveness of bonds and benefiting emerging markets like India. 

Vinod Nair, Head of Research at Geojit Financial Services, said, "The consistent fall in the US dollar index has provided a relief from FPI selling, while domestic institutions buying continues to be strong, triggering the recent upside."

 

Market breadth was strong, with 2,395 stocks advancing and 1,630 declining. Barring two, all Sensex stocks gained. Bharti Airtel, which gained 4.2 per cent, was the best-performing Sensex stock and its biggest contributor to benchmark gains, followed by HDFC Bank, which rose 1.3 per cent, and Reliance Industries, which rose 1.7 per cent.

 

Ajit Mishra, SVP Research at Religare Broking, said, "With the Nifty surpassing the 23,100 resistance, the next target is 23,400. The catch-up rally across sectors presents trading opportunities."  Foreign Portfolio Investors (FPIs) were net buyers of Rs 3,239 crore, and domestic institutions  sold shares worth Rs 3,136 crore. 

FTSE rejig set to spur $1.4 bn inflows today

 

Domestic equities are set to receive net inflows of roughly $1.4 billion on Friday from passive funds tracking FTSE indices.   As part of its semi-annual review, the global index provider has added over 50 domestic stocks to its indices. These stocks will see passive buying ranging between $4 million and $427 million.  Stocks that will see the highest inflows are ICICI Bank ($427 million), Kotak Mahindra Bank ($155 million), Zomato ($65 million), and ITC Hotels ($53 million), according to a study by IIFL Alternative.