Domestic markets rally in early deals on Fed's dovish stance

Indian equity benchmarks made gap-up opening and recorded a new life high on Thursday tracking overnight gains on wall street as well as firm cues from Asian counterparts amid optimism over the outlook for interest rates after the US Fed left interest rates unchanged and the accompanying statement signaled three interest rate cuts next year as inflation eased over the past year. At this point of trade, markets are trading in fine-fettle with gain of over a percent each on account of value buying mainly in IT stocks. Foreign fund inflows aided sentiments. Provisional data from the National Stock Exchange (NSE) showed that foreign institutional investors (FIIs) net bought shares worth Rs 4,711 crore on December 13. Sentiments got a boost as Asia Development Bank (ADB) said India’s economy would grow 6.7 per cent in Financial Year 2023-24 (FY24), raising the estimate from 6.3 per cent it made in September. The lender revised its estimate based on India’s higher-than-expected gross domestic product (GDP) growth, of 7.6 per cent, in the second quarter of FY24.

Also, investors are eyeing inflation numbers based on wholesale price index (WPI) to be out later in the day for more directional cues. On the sectoral front, IT stocks leading the gainers on the indices after the 10-year U.S. Treasury yield dropped to the lowest level since August on the Fed's dovish stance. In stock specific development, NBCC traded higher after the civil construction company was awarded a Rs 1,500 crore contract.

The BSE Sensex is currently trading at 70451.20, up by 866.60 points or 1.25% after trading in a range of 70110.75 and 70468.15. There were 23 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.71%, while Small cap index was up by 0.84%.

The top gaining sectoral indices on the BSE were IT up by 2.59%, Realty up by 2.10%, TECK up by 2.05%, Bankex up by 1.52% and Utilities up by 1.18%, while Healthcare down by 0.01% was the top losing index on BSE.

The top gainers on the Sensex were Tech Mahindra up by 3.58%, HCL Technologies up by 3.04%, Wipro up by 2.78%, Bajaj Finance up by 2.42% and Infosys up by 2.35%. On the flip side, Power Grid down by 0.74%, Nestle down by 0.53%, Sun Pharma down by 0.49%, Asian Paints down by 0.29% and Titan Co down by 0.07% were the top losers.

Meanwhile, attributing the sharp uptick in India’s Gross Domestic Product (GDP) in the first half of the current fiscal (H1FY24) to infrastructure spending and good performance by large economies of the world, Former Reserve Bank of India (RBI) governor Raghuram Rajan said that India has to do a lot of catching up and the $5 trillion economy goal for 2025 is nearly impossible. He further said that even as India’s growth rate is strong, private investment and private consumption have not picked up. India retained the tag of the world’s fastest-growing major economy, with its GDP expanding by a faster-than-expected rate of 7.6 per cent in the July-September quarter on booster shots from government spending and manufacturing.

He noted that over the last four years, from the pre-pandemic days till today, the Indian economy has grown about 4 per cent a year. He said ‘That is way below our growth potential (economic growth rate) of 6 per cent. So you said inflation is contained. One of the reasons inflation is contained is we haven’t even grown at our potential rate’. He emphasised that India needs to grow much faster as the worrying fact that the growth is not providing enough jobs. He said ‘We are about 5 per cent below our trendline which was the pre-pandemic trendline. So there is some catch-up to be done at this point’.

Noting that for democracy to work, the government needs to share the data with the people, he said ‘You can not simply pull numbers out of a hat and say…we will be a $5 trillion economy by 2025.’ According to Rajan, it is virtually impossible for India to become a $5 trillion economy by 2025 unless a ‘miracle’ happens. He explained ‘Because we are now maybe $3.5 trillion economy, to be a $5 trillion economy, you have to grow at 12 to 15 per real growth rate over the next two years’. Rajan wondered whether the government has any plan for increasing India’s economic growth from the current 6 per cent-plus to 12-15 per cent.

The CNX Nifty is currently trading at 21172.15, up by 245.80 points or 1.17% after trading in a range of 21074.45 and 21175.80. There were 36 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were Tech Mahindra up by 3.79%, HCL Technologies up by 3.06%, LTIMindtree up by 2.88%, Wipro up by 2.59% and Bajaj Finance up by 2.58%. On the flip side, Power Grid down by 0.80%, Cipla down by 0.65%, BPCL down by 0.63%, Nestle down by 0.62% and Sun Pharma down by 0.55% were the top losers.

Asian markets are trading mostly in green; Hang Seng jumped 179.51 points or 1.11% to 16,408.26, Taiwan Weighted surged 150.94 points or 0.86% to 17,619.87, Jakarta Composite gained 57.83 points or 0.82% to 7,133.17, KOSPI increased 32.74 points or 1.3% to 2,543.40, Straits Times rose 27.34 points or 0.88% to 3,131.60, Shanghai Composite added 8.8 points or 0.3% to 2,977.56, while Nikkei 225 was down by 256.38 points or 0.78% to 32,669.97.