Shares soar as Fed chair signals smaller hikes ahead

Sensex climbed 184.54 points or 0.29% to settle at 63,284.19 and Nifty advanced 54.15 points or 0.29% to end at 18,812.50

Indian benchmark indices rose to fresh highs on Thursday after Federal Reserve Chairman Jerome Powell indicated that U.S. rate hikes could be scaled back as early as December.

Powell’s remarks affirmed expectations the Fed will raise interest rates 50 basis points at its meeting this month after four successive 75 basis-point rate hikes. One basis point is one hundredth of one percentage point.

The comments lifted stocks across the globe. The S&P BSE Sensex rose 0.29 per cent to close at 63,284.19, while the NSE Nifty 50 index closed 0.29 per cent higher at 18,812.50. Both the Indian indices rose about 0.7 per cent to fresh all-time highs on Thursday.

“Bulls got more reasons to celebrate, boosted by favourable macroeconomic data and strong global markets. The Indian economy’s growth of 6.3% in Q2 was in line with the RBI’s forecast, while the manufacturing PMI rose to 55.7 in November. Global investors' concerns were allayed as the Fed chair adopted a dovish stance indicating slower rate hikes in the future,” said Vinod Nair, the head of Research at Geojit Financial Services.

Others agreed.

“The possible beginning of the end of the rate-hike cycle has boosted sentiments in the equity market globally,” Gaurav Dua, the head of capital market strategy at Sharekhan by BNP Paribas, told DH.

Powell’s comments came less than a week ahead of the Reserve Bank of India’s monetary policy committee meeting.

Dua said the RBI could raise its key lending rates by 30 to 35 basis points. Fisdom research head Nirav Karkera pegged the hike anywhere between 25 and 40 basis points, while Religare Broking research head Siddarth Bhamre anticipated a hike under 25 basis points.

The experts listed any potential surge in crude prices, persistent domestic inflation and a worsening current account deficit as critical headwinds that could dim the upbeat momentum.

“The state election results would also be an influencing factor in the immediate term,” Dua said.