Nifty, Sensex Pare Gains After Record Highs As Fed Cuts Big: Midday Market Update
At 12:05 p.m., Nifty was trading 0.23% higher at 25,431, and Sensex was up 0.31% at 83,215.
Indian benchmark indices pared gains after hitting fresh highs for the second consecutive session, tracking global peers after the US Federal Reserve slashed key interest rates by 50 basis points.
Moreover, the Fed Chair, Jerome Powell, also indicated that a further 50 basis points cut might be in the offering this year.
On Dalal Street, financials and consumer stocks led the day's gains on positive sentiments after the Fed rate cut came at the higher end of market expectations.
At 12:05 p.m., the NSE Nifty 50 was trading 55 points, or 0.23% higher at 25,431, and the S&P BSE Sensex was up 269 points, or 0.31% at 83,215. Both Nifty and Sensex rose as much as 0.92% and 1% respectively, to hit record levels earlier in trade.
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US Fed Rate Cut Highlights: Jerome Powell Goes For A 50 Bps Cut With 'Flexible Future' Talk
The Federal Open Market Committee lowered the rate for the first time in more than four years by 50 basis points to 4.75-5.00% on Thursday. The big cut was as per expectations, as traders weighed on deeper cuts just ahead of the decision.
Dot plot of Fed officials' commentary now expects to lower rates by one percentage point by year-end, implying two more quarter-point cuts or one larger, half-point cut.
It is worth pointing that foreign inflows have been positive going ahead into the Fed decision. Global funds have pocked about Rs 31,000 crore so far this month. Inflows are set to improve as India is best placed to attract flows in emerging counties as a result US central bank's rate decision.
Chair Jerome Powell noted that the Fed is not in a pre-set course and dot plot projections are not a policy plan. "Our recalibrated policy stance will help maintain the strength of our economy and the labour market and continue."
The big Fed rate cut by 50 bps has the potential to take equity markets into a consolidation phase with an upward bias, according to V K Vijayakumar, chief investment strategist, Geojit Financial Services Ltd. "In brief, the market scenario is turning favourable for rate-sensitives, particularly banking."
Lot of positives are already priced in the domestic markets and there could further be upside outside of the index, according to Gautam Shah, founder and chief strategist at Goldilocks Premium Research. Bank Nifty offers great value currently and financial space is poised to do extremely well given the Fed outcome, he said.
Shares of HDFC Bank Ltd., NTPC Ltd., ICICI Bank Ltd., Hindustan Unilever Ltd., and Kotak Mahindra Bank Ltd. were positively contributing to changes in the Nifty 50.
While those of Larsen and Toubro Ltd., Tata Consultancy Services Ltd., Oil and Gas Corp., Bharat Petroleum Corp., and State Bank of India were negatively contributing to the changes.
On NSE, eight of the 12 sectors declined, with Nifty Media and Oil and Gas climbing the most on Thursday morning. Nifty FMCG rose the most.
Broader markets underperformed the benchmark indices, with the Midcap and Smallcap trading 1.72% and 2.20% lower, respectively, through midday on Thursday.
On BSE, five of the 20 sectors advanced, with BSE FMCG and Bankex leading the climb.
Around 870 stocks rose, 2,931 stocks declined, and 142 remained unchanged on the BSE.
