Indian benchmark stock indices opened higher on Thursday, tracking gains in other Asian markets, as investors saw an overnight hike in US Fed rates on expected lines as a sign of recovery in the world’s largest economy.
The Sensex rose about 150 points, crossing the 7800 mark for the first time in about two weeks, a day after the US Fed raised interest rates by 0.25%, the first such hike since 2006. The quarter-basis-points rise matched investor expectations worldwide of a calibrated tightening of lending rates by the US Fed. The rupee also opened marginally higher at 66.60 to a dollar.
“US Fed delivered exactly what the markets expected with upbeat assessment of US economy and dovish commentary on future rate hikes. This cheered equity bulls,” said Sageraj Bariya of East India Securities.
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 Federal Reserve raised interest rates for the first time in nearly a decade.
The US Fed raised its benchmark short-term interest rates by 0.25% after keeping it around zero since the start of the 2008 financial crisis.
The hike, announced after a meeting of the Fed’s top policy-making body on Wednesday was broadly along anticipated lines.
“The committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise over the medium term to its 2% objective,” the Fed said.
On Wednesday evening the Sensex had settled at over a one-week high of 25,494.37 mostly on value buying, while the broader NSE Nifty finished slightly above 7,750-mark.
Sentiment also got a lift from finance minister Arun Jaitley’s assurance that the proposed Goods and Services Tax (GST) rate would be less than 18% and on likely scrapping of 1% additional tax.
Earlier in the morning, Asian stocks posted broad gains after the Fed indicated further rate hikes will be gradual.
Japan’s Nikkei 225 jumped 2.3% to 19,484.29 and Hong Kong’s Hang Seng rose 1% to 21,922.19.
South Korea’s Kospi added 0.3% to 1,975.04. Australia’s S&P/ASX 200 advanced 1.7% to 5,115.20. China’s Shanghai Composite gained 0.9% to 3,548.98.
The widely expected move was met with a surge in shares in New York and Europe as well as Latin America as the US central bank reiterated its view that the world’s number-one economy is in rude health.
(With agency inputs)