Market cheers Fed rate hike: Nifty, Midcap at record closing high; Sensex up 188 pts
Thu Mar 16 2017
Ramesh Sridharan (877 articles)

Market cheers Fed rate hike: Nifty, Midcap at record closing high; Sensex up 188 pts

Bulls regained strength on Thursday as the Nifty ended above psychological 9,100-mark for the first time ever after Federal Reserve delivered rate hike, and ahead of the outcome of GST Council meet later today.

After a day of consolidation, the 30-share BSE Sensex gained 187.74 points at 29,585.85, which is 96 points away from its record close of 29,682 that touched on January 29, 2015.

The 50-share NSE Nifty closed above 9,100 level for the first time, up 68.90 points at 9,153.70.

The broader markets continued to outperform benchmarks, with the Nifty Midcap up 1.4 percent to end at record closing high on positive breadth. About five shares advanced for every share falling on the exchange.

On Wednesday, Federal Open Market Committee raised the federal funds rate by 25 basis points and projected for two more rate hikes this year and three in next year.

Experts are upbeat on the positive movements and are not very concerned about high valuations.

“Growth is returning to economies and the atmosphere for global equities is good now,” says Vibhav Kapoor of IL&FS who expects the Nifty to clock 10,300 by March 2018, albeit with caveats on earnings growth and 10-year yields in the US.

He says at current valuations, it is important that earnings growth should come through. In terms of a correction due to valuations, Kapoor feels it may be minimal and he does not expect deep fall in the markets.

Jayant Manglik of Religare Securities says traders should continue with buy on dips approach and avoid contrarian trades. Market is offering opportunities across the board but it’s important to keep a close eye on sector rotation and timing them accordingly, he adds.

Volatility index slipped below 12, down 4 percent today and lost 15 percent during the week.

Meanwhile, the rupee ended at 65.41, the highest level against US dollar since October 30, 2015, up 27 paise from previous close after rally in equity markets.

All sectoral indices participated in the rally, wherein Nifty Metal (up 2.84 percent), Realty (up 1.24 percent) and IT (1.16 percent) gained the most.

The rally in metals stocks was largely driven by upside in global commodity prices. Tata Steel, Hindalco Industries and SAIL surged 4-6 percent.

Another factor that lifted Tata Steel was that according to CNBC-TV18’s sources the company will finalise decision on UK business merger by May that will include company’s largest plant Port Talbot. Tata Steel-Thyssenkrupp talks are in final stages of price negotiation. Both completed operational due diligence.

Adani Ports was the biggest gainer among Sensex and Nifty stocks, up nearly 5 percent followed by Bajaj Auto, Asian Paints and Tata Motors.

HDFC, Infosys & L&T were top contributors to the Nifty index gain, up more than 1 percent whereas Reliance Industries, Hero Motocorp, ICICI Bank and Bharti Airtel were losers.

In broader space, Reliance Defence and ABG Shipyard rallied 5 percent each as sources told CNBC-TV18 that Reliance Defence has expressed its interest in buying ‘agreed assets’ of ABG Shipyard but is not interested in equity stake in the company.

Reliance Capital shares rallied 8.5 percent as the company said it would expand health insurance business that would be transferred to separate subsidiary. APL Apollo surged 4.6 percent after NEXTracker will manufacture torque tubes in India in tie-up with the company.

Global markets also gained strength after Federal Reserve raised rates. In Asia, Hong Kong’s Hang Seng rallied 2 percent and China’s Shanghai was up 0.86 percent while markets in Europe were higher by a percent.

Ramesh Sridharan

Ramesh Sridharan

Ramesh Sridharan is our Stock Market Correspondent covering events and daily movements of stock markets in Asia. He is based in Mumbai