Mumbai: The Indian markets continued their bull run on Thursday despite weak global cues post the Federal Open Market Committee (FOMC) meet.
Asian markets were nervous on the Federal Reserve’s hawkish stance as an interest rate hike is generally expected to prompt traders and investors to park funds in dollar-denominated assets.
However, analysts said that the Fed’s decision is a non-event for India and the markets are prepared for two rates this year.
Anup Maheshwari, executive vice-president, head-equities and corporate strategy, DSP BlackRock Investment, said that the Indian markets have already priced in Fed rate hikes.
“Though rate hike by Fed is negative for India, historically there has been no negative correlation between Fed rate hike and Indian markets performance,” he said.
According to Maheshwari, India is well-placed and preferred among emerging markets.
The Nifty ended at a record closing high at 9,365.65, while the Sensex made an intraday gain of 0.92% on Thursday.
The Bank Nifty ended at a record closing high, climbing 2% during the day.
Buying in the domestic markets is propelled by liquidity and as lew of government reform measures which are expected to drive economy recovery.
As a push to resolve stressed assets in the banking system, the cabinet has decided to amend the Banking Regulation Act, which drove a massive rally in banking stocks on Thursday.
Vinod Nair, head of research, Geojit Financial Services Ltd, said, “Government’s one step closer to new non-performing asset (NPA) policy and the national steel policy had given some energy to the market from current consolidation. Banks are in a sweet spot due to the new framework to deal with NPA and better quarter results. The Fed kept the rates on hold amid the slow pace in economic growth but the market is not expecting any deviation from two more hikes in 2017.”
The Indian markets are in a tear after touching record highs in April.
The Sensex gained 13.1%, the Nifty jumped 14.3%, while the MSCI World was up 7.53% and the MSCI EM has gained 14.3% in 2017 so far.
Maintaining its hawkish stance, the Fed indicated that despite a growth slowdown in the first quarter, it may raise rates two more times this year.
As largely expected, the US Federal Reserve kept its interest rates unchanged but said that weak economic growth in the first quarter is likely to be “transitory” after its two-day meet concluded on Wednesday night.
At its last meeting in March, the Fed had raised its benchmark rate by a quarter percentage point to a target range of 0.75-1%.
Meanwhile, the dollar index, which measures the greenback against a basket of currencies jumped 0.26% on Thursday. The dollar index has been under pressure this year, falling 3.05% in 2017. The strength in dollar has put pressure on commodities at large.
“The Fed’s optimism about US economy kept June rate hike expectations alive and this pushed dollar higher. Market focus will now shift to US non-farm payrolls data tomorrow (on Friday) and the second round of French Presidential elections on May 7. Also in focus will be comments from Fed officials on Friday,” Kotak Commodities said.