The Indian stock markets opened on a robust note on Thursday, buoyed by the United States Federal Reserve’s decision to maintain interest rates at current levels. The move was met with positive investor sentiment, lifting key indices at the opening bell.
The BSE Sensex surged by 381.49 points to reach 75,830.54, while the NSE Nifty rose by 118.65 points to open at 23,026.25. Market breadth remained strong, with 41 out of 50 Nifty-listed companies recording gains.
Among the top gainers in the Nifty index were Wipro, Infosys, Bharat Electronics Limited (BEL), Hero MotoCorp, and HCL Technologies. Conversely, HDFC Life, UltraTech Cement, JSW Steel, Sun Pharma, and Dr Reddy’s Laboratories were among the major decliners.
The US Fed’s decision was accompanied by a downward revision in growth projections, alongside an increase in inflation and unemployment forecasts.
The central bank also announced a reduction in its quantitative tightening (QT) from USD 25 billion to USD 5 billion per month.
Ajay Bagga, a noted banking and market expert, commented on the impact of central banks’ policy decisions worldwide.
“All central banks acted as per market expectations yesterday. The Bank of Japan hit the pause button, citing continued trade policy uncertainty as an overhang on its economy,” he stated.
Bagga also noted developments in other global financial institutions. “Bank Indonesia refrained from further cuts in the face of the sharp falls in the Rupiah as well as the stock market as a reaction to falling consumption demand and business sentiment. The PBOC did not announce any changes to its Prime Rates this morning for key terms.”
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Meanwhile, the Brazilian Central Bank diverged from this approach, opting for an aggressive rate hike. It raised interest rates by 100 basis points, its third consecutive increase, in a bid to curb rising inflation. The move pushed the benchmark Selic rate to 14.25 per cent, a level last witnessed in 2016.
Bagga underscored the significance of the Federal Reserve’s latest policy stance, which was perceived as a dovish signal by global markets.
“The US markets reacted positively to these changes, interpreting them as a dovish signal from the Fed. Wall Street rallied, bond yields declined, and the US dollar strengthened. The reduction in QT is seen as an indirect policy easing, which could improve global liquidity conditions,” he said.
Despite sustained selling by Foreign Portfolio Investors (FPI), Indian equities displayed remarkable resilience.
The Nifty 50 appears poised to surpass the 23,000 mark, a level which could potentially spark a further rally by squeezing short positions.
However, challenges persist in the form of global trade uncertainties, particularly with the imminent imposition of reciprocal tariffs on 2 April, which could trigger a wave of retaliatory measures worldwide.
The impact of economic uncertainties has also been reflected in the surge in gold prices, with investors increasingly turning to the precious metal as a safe-haven asset.
Bagga remarked, “Gold continued making new highs with economic, political and security concerns adding to its allure. Indian markets rose despite another day of FPI selling and are set to cross 23,000 levels on the Nifty 50 today, which could see a squeeze of shorts and lead to a sharper uptick. The overhang remains continued FPI selling.”
He further warned of risks associated with global trade tensions, stating, “The biggest overhang on markets remains the April 2nd reciprocal tariffs which could lead to widespread tariffs across the world and set off a retaliation cycle. Given that, we remain cautious on the Indian markets despite the recovery we have seen in the past few days.”
The trajectory of Indian equities in the coming days will likely hinge on global trade dynamics and investor confidence amid lingering economic concerns.
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