Indian Equities Surge as Powell’s Dovish Statement Fuels Global Rally
Indian equity benchmarks surged on Monday following a dovish statement from Federal Reserve Chair Jerome Powell, which fueled a global market rally. The Sensex closed at 81,698, gaining 612 points or 0.75%, marking its fifth consecutive day of gains. The Nifty ended at 25,011, up 188 points or 0.8%, achieving its longest winning streak since July 2023. Notably, the Nifty closed just shy of its record high of 25,010.9, while the Sensex remains 169 points away from its all-time high.
The market capitalization of BSE-listed firms increased to Rs 462.3 trillion, adding Rs 2.3 trillion. Foreign portfolio investors purchased shares worth Rs 483 crore, and domestic institutional investors infused Rs 1,870 crore.
Powell’s remarks at the Jackson Hole meeting indicated that the U.S. Federal Reserve is poised to cut interest rates, contingent on incoming data and aimed at achieving the Fed’s inflation target of 2%. Despite the lack of clarity on actions post-September, markets responded positively. Currently, the Fed’s benchmark rates are at their highest in over two decades, ranging from 5.25 to 5.5%.
Powell’s comments have sparked a debate on the magnitude of the anticipated rate cut, with some speculating a 50 basis point reduction in September. However, such a significant cut may suggest underlying weaknesses in the U.S. economy.
Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services, noted that Indian equities celebrated the festive milestone of retaking the 25,000-mark, driven by the Fed’s signals of imminent rate cuts. He expects continued momentum, heading towards new highs, with a focus this week on GDP data from India and the U.S., derivatives monthly expiry, and other global cues.
Despite escalating Middle East tensions following an Israeli attack on Hezbollah missile launchers in Lebanon, which has made investors jittery, the global rally remained buoyant. Brent crude traded at $80 per barrel, up 1.3%.
Ajit Mishra, SVP of research at Religare Broking, advised maintaining an optimistic outlook given the favorable global cues and recommended a ‘buy on dips’ strategy. He emphasized the need for decisive action from major private banks to sustain momentum. The gains in the Sensex were primarily driven by HDFC Bank and Reliance Industries, with significant contributions from IT firms with substantial U.S. revenue.
Original Story https://www.business-standard.com/markets/news/markets-rise-as-fed-chief-jerome-powell-s-comments-fuel-global-rally-124082600854_1.html
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