Sensex, Rupee Jump as Rate Hike Fears in US Ease

The BSE Sensex soared nearly 250 points, while the 50-share Nifty edged above the key 8,750 mark on Thursday tracking overnight developments in the US, where the Federal Reserve signaled that it is unlikely to hike rates in a hurry despite dropping the word “patient” from its policy statement.

The rupee also jumped 0.5 per cent to 62.38 per dollar as against Wednesday’s close of 62.69 per dollar.

The US central bank downgraded its economic growth and inflation projections in an indication that a rate hike may get deferred to the latter part of the year.

“There is a high probability that a rate hike may not take place this year… We will be overweight risk assets through this year,” Hans Goetti of Banque Internationale a Luxembourg told NDTV.

The US Fed’s dovish outlook on rate hike is good news for emerging markets like India, who have been the beneficiaries of huge foreign flows over the last many years. In this financial year alone, the country has received over $ 40 billion foreign funds in equity and debt markets.

If the US Fed would have signaled an earlier-than-anticipated rate hike, the Sensex and Nifty might have tumbled because short-term funds would have flown out of the country.

Analysts say the development in the US augurs well for Indian stock markets though gains in the morning trade might not sustain because equities are fully valued.

“Markets are unlikely to close with very large gains… From a short to medium term, my advice would be to take some money off the table,” said Gaurang Shah of Geojit BNP Paribas.

The Sensex hit a record high above 30,000 earlier this month, but valuations have become expensive considering the facts that Indian companies are struggling to raise profitability. Besides, most of the positive triggers – such as interest rate cuts and the Union Budget – have come and gone.

As of 09.22 a.m., the Sensex traded 195 points higher at 28,817, while the Nifty traded at 8,738, up 52 points.

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