India's benchmark indexes hit all-time highs on Thursday, joining a global rally after the US Federal Reserve bolstered expectations of an interest rate cut in March 2024.

The NSE Nifty 50 index rose 1.23 per cent to 21,182.70, while the S&P BSE Sensex advanced 1.34 per cent to 70,514.20.

The 50-member Nifty index has now hit a record high in eight of the 10 sessions so far this month. Its 5.21 per cent gain over this period is almost equal to the 5.52 per cent increase over the whole of last month, which was its best since July 2022.

The Fed, late on Wednesday, acknowledged "real progress" in easing inflation, while holding rates. Chair Jerome Powell said the Fed is aware of the risks of lowering rates too late, bolstering expectations of a rate cut in March 2024.

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That was the latest in a confluence of optimistic indicators that has boosted the domestic market.

"Hopes of political stability in 2024, a robust macroeconomic backdrop, the weakening dollar and U.S. bond yields amid expectations of a 2024 US rate cut have fueled bullish momentum," said Parth Nyati, founder of online trading platform Tradingo.

Information technology (IT) stocks, which earn a significant share of their revenue from the United States, surged 3.50 per cent, their best session in five months.

Banks and financials gained about 1.35 per cent each. Realty index rallied 3.88 per cent to a new record high, aided by strong housing sales and a robust demand outlook.

The small- and mid-cap indexes added 0.85 per cent and 1.31 per cent, respectively.

They have jumped 52 per cent and 45 per cent in 2023 so far, respectively, easily outpacing the 17 per cent rise in the Nifty 50.

With mid- and small-caps valuations near 2018 highs, "It is prudent to tweak allocations in favour of large-caps," said Harsha Upadhyaya, chief investment officer of equity at Kotak Mahindra Asset Management.

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