After Fed chair Jerome Powell kept hopes alive for an interest rate cut in June, the Sensex closed 540 points higher, while the Nifty saw a jump of 0.8% on Thursday, with metals leading the charge on the back of a softer US dollar.
Meanwhile, following the rally, the market capitalisation of all listed companies on BSE increased by Rs 5.88 lakh crore to Rs 380 lakh crore.
The broader, more domestically-focused small- and mid-caps closed about 2.5% and 2.4% higher, respectively, shirking off their recent underperformance.
US sticks to rate cut plan
Overnight the Fed left US rates on hold between 5.25% and 5.5%, as expected, and nudged up inflation forecasts. Policymakers’ median projection for three 25 basis point rate cuts this year was unchanged from December.
Fed Chair Jerome Powell told reporters sticky inflation reports show price pressures but “haven’t really changed the overall story, which is that of inflation moving down gradually”.
Global markets rally
Fed’s messaging sparked a global rally in stocks. Wall Street ended 1% higher overnight, Japan’s Nikkei and Hong Kong’s Hang Seng closed 2% higher today, while Kospi jumped over 2.4%. A majority of 67% of Wall Street traders are expecting the Fed to cut rates by 25 bps in its June meeting, according to shows CME FedWatch Tool.
US S&P 500 futures were up 0.3% pointing to further gains on Thursday.
Decline in US treasury yields
US Treasury yields fell slightly in New York trade and were steady in Asia. Two-year yields were last at 4.56% and 10-year yields at 4.23%.
Oil Impact
Oil prices were marginally lower on Thursday, as a surprise U.S. crude stock drop and the US Federal Reserve sticking to its outlook on rate cuts for the year offered support.
Brent crude futures for May were down 15 cents to $85.81 a barrel. US West Texas Intermediate futures for May were down 16 cents, or 0.2%, to $81.13 a barrel after a fall of about 1.8% in the previous session.
Buying at lower levels
After experiencing a correction of nearly 3% last week, investors responded by engaging in buying activity at lower levels. The Nifty reached a 52-week high of 22,526 on March 11, with the Nifty level standing at 21,839 the previous day.
