India’s benchmark stock indices jumped more than 1% on Thursday, tracking bulls across Asian markets after the US Federal Reserve yet again left interest rates unchanged and signalled less aggressive hikes in the next year too.
The Bombay Stock Exchange’s Sensex accelerated over 308 points or 1.1% at 28,830.50 and the wider NSE Nifty rose 113 points or 1.3% to 8,890.10 in early trading.
The US Fed has left its low-rate environment unchanged for now, signalling it could tighten monetary policy towards the end of 2016. However, only one interest rate hike is now expected this year, instead of two expected earlier.
Markets were expecting a hawkish stance from the Fed, but now believe that there may be no hurry to raise rates dramatically, say analysts.
“Janet Yellen’s (Fed Chairperson) speech clearly indicates a state of indecision as no tangible reason was put forward for defering a rate hike. Markets have expectedly cheered no hike in interest rates,” said Sageraj Bariya, vice-president at East India Securities.
The Fed has left its overnight lending rate at 0.25-0.50% since December 2015, when it lifted rates for the first time in almost a decade.
Earlier, Bank of Japan had maintained its 0.1% negative interest rates, while announcing new measures like yield curve control to keep Japanese 10 year bonds at 0% interest.
The low rates mean emerging markets like India will still remain attractive for foreign investors. So far in calendar 2016, FIIs have invested Rs 45,584 crore in India’s equity markets versus Rs 17,808 crore in the whole of 2015.
Overnight, the Dow Jones Industrial Average closed up 0.9% and the Nasdaq rose 1%. Across Asia, JHong Kong’s Hang Seng and Korea’s Kospi were all 1-2%. China’s Shanghai Composite Index also rose 0.8%.
Back home, rate sensitive banks and automobile stocks led the gainers. ICICI Bank, Axis Bank and HDFC Bank surged 1.5-2.2% and Hero MotoCorp, Bajaj Auto, Maruti Suzuki and Tata Motors gained 1-3%.