Indian markets surge to record highs as Federal Reserve boosts rate cut expectations

Indian benchmark indexes reached unprecedented levels on Thursday, riding the wave of a global rally fuelled by fresh indications from the U.S. Federal Reserve, Reuters reported.

The NSE Nifty 50 index rose by 1.23 per cent to reach 21,182.70, while the S&P BSE Sensex advanced 1.34 per cent to 70,514.20. This surge marks a historic achievement for the Nifty, which has set a record high in eight out of the ten sessions this month, reflecting a 5.21 per cent gain, nearly matching the 5.52 per cent increase seen throughout the previous month.

The U.S. Federal Reserve's acknowledgement of "real progress" in easing inflation, coupled with expectations of a rate cut in March 2024, has further propelled the Indian markets.

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Chair Jerome Powell's statement, acknowledging the risks of delaying rate cuts, has contributed to optimistic sentiments in the Indian market.

Reuters cited Parth Nyati, the founder of online trading platform Tradingo, who attributed the bullish momentum to factors such as "hopes of political stability in 2024, a robust macroeconomic backdrop, the weakening dollar, and U.S. bond yields amid expectations of a 2024 U.S. rate cut". Information technology (IT) stocks, heavily reliant on revenue from the United States, experienced a notable surge of 3.50 per cent, marking their best session in five months.

The financial sector also witnessed gains, with banks and financials each recording a rise of about 1.35 per cent. The realty index rallied by 3.88 per cent, achieving a new record high. This surge is attributed to robust housing sales and a positive demand outlook in the real estate sector.

The small- and mid-cap indexes added 0.85 per cent and 1.31 per cent, respectively, bringing their total gains in 2023 to 52 per cent and 45 per cent, outpacing the Nifty 50's 17 per cent rise.

As mid- and small-cap valuations reach levels last seen in 2018, Harsha Upadhyaya, Chief Investment Officer of Equity at Kotak Mahindra Asset Management, suggests a prudent adjustment of allocations in favour of large-caps.

(With inputs from Reuters)

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