All discounted: Explaining Sensex, rupee composure in the face of Fed rate hike

Domestic equities moved in a narrow band with a sluggish trend in the afternoon trades, as investors traded with caution post the US Fed rate hike announcement. A short while back, the benchmark Sensex dropped nearly 50 points after surging over 150 points in early trades, as analysts feel the US Fed rate hike move was on expected lines and focus will be on the parliament session for getting the contentious GST Bill passed in the next few days. [caption id=“attachment_2549390” align=“alignleft” width=“380”]  Reuters[/caption] “The interest rate hike by the US Fed was getting discounted by the markets over the last few weeks. With the hike now coming in as expected, investors are prefering to reduce some exposure as the focus will now clearly be on the parliament and whether the government will be able to get the opposition on board to get the GST bill passed in this session of parliaments. So, we can expect a range-bound trend with a negative bias over the next 4-5 sessions,” said Alex Mathew, head technical and derivatives reseach, at Geojit BNP Paribas Financial Services." At 1.15 pm, the 30-share BSE S&P Sensex was at 25,511.85, up 17.48 points, or 0.1 percent from previous close. Earlier in the day, the index extended its rising streak for the fourth straight session and surged 165 points to touch a high of 25,659.32 before turning volatile. Similarly, the 50-stock CNX Nifty, too, trimmed most of its early gains and was at 7,754.85, up 3.95 points, or 0.1 percent after scaling past 7,800-mark in initial rally. Market breadth remained extremely upbeat with gainers outnumbering losers by 2:1 with 1,667 stocks advancing against 825 declines on BSE. Late Wednesday night, Federal Reserve chairman Janet Yellen raised US interest rates by 0.25 percent in a widely anticipated move, and also indicated that it would go slow on future hikes given the complex global economic activity and its impact on commodity prices. Reacting to the rate hike, other Asian markets also bounced back sharply, signifying the steady recovery in the world’s largest economy. Hong Kong’s Hang Seng rose 1.02 per cent and Shanghai Composite gained 1.34 per cent while Japan’s Nikkei surged 2.29 per cent in early trade today. Among the gainers in the Sensex space, shares of Tata Steel jumped 2.9 percent to Rs 251.90, Hindalco rose 1.8 percent to Rs 79.95, HeroMoto Corp gained 1.2 percent to Rs 2,624.10 and Sun Pharma was up 1.1 percent at Rs 793. The rupee also came off its day’s high to trade at 66.64, up 9 paise over previous close. In the morning trades, the rupee appreciated by 13 paise at 66.60 against the US dollar in early trade on increased selling of the American currency by exporters even as the US ederal Reserve raised interest rates for the first time in nearly a decade. Forex dealers said a higher opening in the domestic equity markets also supported the rupee but the dollar’s rise against other currencies overseas after the American central bank hiked interest rates, capped the gains. The rupee had jumped by 19 paise to close at one-week high of 66.73 against the US dollar yesterday amid rising equities.