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The US Federal Reserve’s decision to raise key interest rates only by 25 bps instead of the anticipated 50 bps boosted stock markets across Asia.
China, Japan and India are among the large borrowers of the US debt in Asia and the Fed’s decision to not pursue aggressive rate hike brought cheer to all the major Asian markets on Thursday, analysts said. Even the statement by the Fed that it would be raising rates in all its upcoming policy meetings this year did not see major negative reaction from other global markets. Sensex rose by 1047 points or 1.84 per cent at 57,863. Nifty gained 311 points or 1.84 per cent at 17,287. Hong Kong’s Hang Seng was up 7 per cent, Japan’s Nikkei rose by 3.46 per cent, Taiwan Weighted gained 3 per cent and China’s Shanghai Composite was up 1.4 per cent. Foreign portfolio investors (FPIs) net purchased stocks worth ₹2,800 crore in the cash segment, provisional data showed. In the index futures, FPIs were net buyers worth ₹4,303 crore and in stock futures worth ₹823 crore. It is among the largest single day net purchases by FPIs since the Budget.
The Rupee (INR) closed 47 paise stronger on Thursday due to a combination of factors, including the US Fed cutting its benchmark rate only by 25 basis points, surge in equity indices, crude oil price slipping below $100 a barrel and hopes that there will be some progress in talks between Russia and Ukraine amid the war. The domestic unit closed at 75.7950 per Dollar (USD) against the previous close of 76.2650.
“The main reason for the rupee to appreciate was the drop on the crude prices. Positive sentiments around the Ukraine Russia negotiation and possibilities of alternate ways for Russian crude oil to reach buyers and hopes of positive Iran nuclear talks have brought the crude prices down,” IFA Global said in a report.
Impact on G-Sec
Meanwhile, the thaw in crude oil price and the US Fed’s action of paring benchmark rate only by 25 basis points against the expected 50 basis points had a salubrious effect on Government Securities (G-Sec/ GS).
Price of the 10-year benchmark G-Sec (coupon rate: 6.54 per cent) was up 7 paise, closing at ₹98.30 (₹98.23). Yield of this paper thawed about a basis point to close at 6.7781 per cent (6.7879 per cent).
Price of the widely traded G-Sec (6.10 per cent GS 2031) rose about 20 paise, closing at ₹95.1475 (₹94.95). Yield of this paper softened about 2 basis points to close at 6.8107 per cent (6.84 per cent).
Analysts say that market mood is likely to remain buoyant in India since government’s tax mop-up on personal and corporate income jumped over 48 per cent in the current fiscal after a 41 per cent surge in advance tax payments. It simply means that India was on the path of a sustained economic recovery even though it was hit by two waves of coronavirus infections. “Sometime around May or June, India’s stock markets could hit new highs. As of now, markets have bottomed out but since we have seen a sharp rally in the past few days there could be some correction in the near term on profit booking. The long term trend is up,” said Rohit Srivastava, chief strategist, India Charts.
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