Sensex zooms 309 points, joins global rally after US Fed's 'dovish rate hike'

Domestic equity markets put up a sterling performance in the last hour of trade, with the benchmark Sensex racing past the crucial 25,800-mark in an over 300 points rally as investors took in their stride the 25 bps rate hike affected by the US Fed in nearly a decade. The CNX Nifty, too, crossed the important 7,800-mark barrier on the back of an all-round buying support in late trades.

On Wednesday, US Fed chair Janet Yellen raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 percent and 0.50 percent. Along with the hike, Yellen, while making a dovish statement, indicated that the future rate hikes would be gradual and in a way offered relief to millions of investors worldwide, who had feared a hawkish stance could have triggered massive outflows from emerging markets.

“To keep the economy moving along the growth path it is on … we would like to avoid a situation where we have left so much (monetary) accommodation in place for so long we have to tighten abruptly,” she said.

According to Reuters, Fed policymakers’ median projected target interest rate for 2016 remained 1.375 percent, implying four quarter-point hikes next year. Based on short-term interest rate futures markets, traders expect the next rate hike in April.

Extending the upsurge for the fourth straight session, the 30-share benchmark Sensex in tandem with firm Asian and overnight US markets upsurge started off on a firm note, rising more than 100 points before turning range-bound with a negative bias thereafter.

However, with positive cues coming in from the European counterparts, stocks witnessed a major turnaround as splendid gains in metals, auto and banking shares enabled the Sensex to touch the day’s high of 25,831.31, up 337 points.

Finally, the 30-share BSE S&P Sensex closed the session at 25,803.78, up 309.41 points, or 1.2 percent from the previous close. The 50-stock CNX Nifty ended the day at 7,844.35, up 93.45 points, or 1.2 percent. In absolute terms, today’s gains for the Sensex was the biggest in nearly a month.

Including today’s upsurge, the Sensex has notched up gains of 759 points in last four sessions.

Market breadth was extremely positive with gainers outpacing losers by nearly 3:1, with 1,946 stocks advancing against 743 declines on BSE.

Following overnight gains in the US markets, other key Asian gauges such as Nikkei rose 1.6 percent, while China’s Shanghai Composite jumped 1.8 percent and Hang Seng ended 0.8 percent higher. European markets, too, joined the global rally, with key indices soaring over 1-3 percent each in their mid-day trades.

Aided by a strong equity market rally, the currency market also witnessed a sharp rebound with rupee towards the closing hours appreciating by 24 paise or up 0.35 percent at 66.50 to dollar against yesterday’s close of 66.74.

The rupee had jumped by 19 paise to close at one-week high of 66.73 against the US dollar yesterday amid rising equities.

“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."

Among the major gainers in the Sensex space, shares of Tata Steel shot up 4.8 percent to Rs 256.55, Vedanta rose 3.7 percent to Rs 87.15, Hindalco jumped 3.4 percent to Rs 81.25, Reliance Industries moved up 3.1 percent to Rs 1,008.35, Bajaj Auto added nearly 3 percent to Rs 2,524.20 and Sun Pharma was up 2.4 percent at Rs 802.60.

Broad market indices, too, maintained their upward bias, with BSE Small-cap index outperforming the market and rising 1.7 percent while BSE mid-cap index ending 1.6 percent higher in firm markets.