Indian stock and currency markets staged a pull-back rally on Thursday as global markets surged after the US Federal Reserve said a rate hike was unlikely in the short-term, and the NDA Cabinet cleared the Constitutional Amendment Bill on GST, paving the way for more economic reforms.
Snapping five days of losses, the benchmark Sensex recorded its biggest gain in one-and-a-half months — rising 416.44 points, or 1.56%, to end at 27,126.57. In the previous five sessions, the index had lost 1,120.97 points, or 4.03%.
The broader NSE Nifty gained 129.50 points, or 1.61%, to end at 8,159.30.
The rupee also rose by 50 paise, the steepest single-day gain in the last seven months, to end the day’s trade at 63.11 against the dollar, in tune with the strong recovery in equities.
The Fed said it was unlikely to start its rate hike process for “at least the next couple of meetings.” This brought relief to Indian investors as a higher interest rate in the US would have resulted in dollar outflows from the domestic markets. Steady returns in the US economy is more preferred to an uncertain investment scenario in an emerging market such as India.
Rating agency Crisil on Thursday said the Indian economy is well prepared to deal with any eventuality arising out of spike in the interest rates by the US central bank.
“Indian markets bounced back strongly helped by the US markets, which ended sharply after dovish comments from the Fed and a rise in crude oil prices,” said Sanjeev Zarbade, vice-president, Kotak Securities. “Progress on reforms such as goods and services tax (GST) would be taken positively. We continue to be positive on market but advise investors to focus on stocks with good management quality, robust growth potential and reasonable valuations.”
Across-the-board buying saw all 12 sectoral indices closing higher in the range of of 1.09-5.26%, with consumer durables, power, capital goods taking the lead.
Of 30 Sensex stocks, 27 finished with gains led by BHEl (up 4.91%), Hindalco (up 4.31%) and Gail India (up 4.19%).
Among the sectoral indices, consumer durables rose 5.26%, followed by power (up 3.26%) and consumer goods (up 2.78%).
Analysts, however, cautioned about the volatility in Russia as overexposure of some European banks in Russian companies might again spook global markets.
“Markets may consolidate at this stage as everyone will now watch out for a possible earlier-than-expected rate hike by the Fed,” said IIFL chairman Nirmal Jain. “Earlier most investors and analysts were expecting it to happen in the later part of 2015 but indications are it may happen early. So investors would watch out for this in addition to the crisis unfolding in Russia.”