Indian benchmark equity indices Sensex and Nifty50 opened higher on Monday, led index heavyweights financial and IT stocks after U.S. Federal Reserve Chair Jerome Powell signalled that interest rate cuts are imminent.
The BSE Sensex was trading 657 points, higher at 81,743. The Nifty50 was up 196 points, trading at 25,019 around 10:20 am.
Speaking at the Jackson Hole Economic Symposium, Powell stated, “the time has come” to lower the Fed funds target rate, adding that “the upside risks of inflation have diminished.”
“We do not see or welcome further weakening in labor market conditions,” Powell noted, all but guaranteeing a rate cut at next month’s policy meeting, which would be the first in over four years.
A rate cut in the US could attract inflows into emerging markets like India, potentially fueling a sustained rally in domestic equities.
Among Sensex stocks, Tech Mahindra, TCS, Infosys, HCL Tech, HDFC Bank, and Axis Bank were the top gainers, rising up to 2%. Meanwhile, ITC, Sun Pharma, Maruti, Adani Ports, UltraTech Cement, and JSW Steel opened with losses.
Sector-wise, Nifty IT rose 1.4%, led by gains in Mphasis, Coforge, and Wipro. Nifty Bank, Financial Services, Metal, Consumer Durables, and Oil & Gas also opened higher. Conversely, FMCG, Pharma, Realty, and Healthcare sectors started in the red.
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KEC International shares rose over 9% on winning orders worth Rs 1,079 crore.
Transport Corporation of India (TCI) shares fell over 6% after the company announced that it will conduct its first-ever buyback of its equity shares worth up to Rs 160 crore.
“The Fed chief Powell’s clear message of the beginning of the rate cutting cycle will impart further resilience to the ongoing global rally in stock markets. Deviating from his usual cautious messaging, this time Powell unambiguously stated that “the time has come for policy to adjust” and that “the direction of travel is clear.” This will act as sort of a “Powell put” similar to the famous “Greenspan put” that supported US equity markets during the Greenspan era,” said V K Vijayakumar of Geojit Financial Services.
“From the Indian market perspective, this is significant since it will strengthen the minority view espoused by the two independent members of the MPC in favour of rate cuts in the last monetary policy meeting. On the flip side, worsening of the Israel-Hezbollah tensions may have a negative impact, if the situation worsens further,” Vijayakumar added.
Deven Mehata, Derivative Analyst at Choice Broking, said, “Nifty can find support at 24,750 followed by 24,700 and 24,650. On the higher side, 24,900 can be an immediate resistance, followed by 25,000 and 25,050.”
Global Markets
Asian shares crept cautiously higher on Monday, while the dollar and bond yields were on the wane ahead of inflation data that investors hope will pave the way for rate cuts in the United States and Europe.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.8%, after rising 1.1% last week, while South Korea was barely changed. Chinese blue chips were also near flat. Japan’s Nikkei lost 1.0% as a stronger yen pressured exporter stocks.
On Monday, S&P 500 futures and Nasdaq futures were steady after starting a shade lower. EUROSTOXX 50 futures dipped 0.2%, while FTSE futures were closed for a holiday.
FII/DII Tracker
The foreign institutional investors (FIIs) extended their buying as they bought equities worth Rs 1,944 crore on August 23, while domestic institutional investors also bought equities worth Rs 2896 crore on the same day.
Crude Oil
Oil prices extended gains on Monday on fears a major spillover in fighting from the Gaza conflict into the Middle East could disrupt regional oil supplies, while imminent U.S. interest rate cuts lifted the global economic and fuel demand outlook.
Brent crude futures climbed 49 cents, or 0.63%, to $78.64 a barrel, while U.S. crude futures were at $75.38 a barrel, up 55 cents, or 0.73%.
Rupee vs Dollar
The Indian rupee rose 10 paise to 83.8 against the US dollar in early trade. The dollar index, which tracks the movement of the greenback against a basket of six major world currencies, declined 0.02% to 100.69 level.
The article originally appeared on The Economic Times.
