Indian equity benchmarks surged to close at a new all-time high, extending their gains for the third straight session, boosted by an advance in global risk assets after Federal Reserve meeting minutes showed support for smaller rate hikes from now on.
“Investors wound up their short positions on the expiry day, triggered by US Fed minutes indicating a moderate pace of rate hikes going ahead that eventually propelled benchmark indices Sensex & Nifty to new all-time highs,” said Shrikant chouhan, Head of Equity Research for Retail at Kotak Securities.
The 30-share BSE Sensex index jumped 762.10 points, or 1.24 per cent, to a new record closing high of 62,272.68, and the broader NSE Nifty-50 index rose 216.85 points, or 1.19 per cent, to end at an all-time high of 18,484.10.
“Markets maintained their firm footing on the last day of the current month expiry and cheering the bulls were the November Fed meeting minutes’ which pointed to a slowdown in tightening,” said Prashanth Tapse, Senior Vice President for Research at Mehta Equities.
“For the (Nifty) index, the immediate goal post is seen at its all-time-high at 18,605 mark and then aggressive targets at the psychological 19,000 mark,” he added.
Asian shares mostly tracked Wall Street higher on Thursday after the S&P 500 closed at a two-month high overnight.
European stocks remained stable as trading volumes were expected to be lower due to the US market being closed for the Thanksgiving holiday, while a measure of global stocks was on track to post a third straight gain.
According to the minutes from the Fed meeting earlier this month, some officials supported the need to slow the rate hikes. In contrast, others emphasised the necessity for a higher terminal rate.
“It was the start of a more different and dovish narrative from the Fed,” Sunaina Sinha Haldea, Global Head of Private Capital Advisory at Raymond James, told Bloomberg.
“Is it a pivot? No, but are we seeing a slowdown in rate hikes and that path downward towards rate cuts coming through? Yes. I think we will look back and say this was the peak of it.”
Data released on Wednesday also showed that the US economy cooled, as the pace of business activity eased, and unemployment applications rose.
So the likelihood has increased for the central bank to raise rates by 50 basis points next month and end a string of large 75 basis point hikes.
While that sent stocks and bonds to surge, only some were convinced of the risk rally.
“If you are at the Fed, you’d be gnashing your teeth at seeing what happened last night in response to the minutes. The market latched on to one sentence, the dovish sounding one, and they ignored the hawkish sounding bits,” Rob Carnell, Head of ING’s Asia-Pacific Research, told Reuters.
“So the reason for such a big rally, particularly in FX markets, with the dollar really giving up ground and equities rallying, is frankly a mystery,” he added.
Investors also weighed the impact of the record Covid-19 cases in China to indications that the financial conditions were easing.
Although they are still doubtful that Beijing’s plan to lower banks’ reserve requirements ratio can significantly boost the nation’s economy as long as the administration maintains its zero-COVID stance.
In the crude market, oil prices are expected to test a significant support level reached in September. If that level is breached, oil prices might drop to levels not seen since early 2021.
After falling more than 3 per cent on Wednesday even as the Group of Seven (G7) nations discussed setting a price cap on Russian oil above the current market price, US crude oil futures declined further on Thursday to $77.74 per barrel.
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