US Fed’s clarity on tapering takes sensex close to 60k

MUMBAI: The statement from the chief of the US central bank that it would start scaling back its $120-billion-per-month bond-buying programme in November, but at the same time won’t raise the rate of interest in the world’s largest market before mid-2022, led to a strong global rally on Thursday, including in India. As a result, the sensex scaled a life-high mark at 59,957 points and closed just a tad off that level at 59,885 — up 958 points on the day.
Reliance Industries, HDFC Bank, HDFC and ICICI Bank led the gainers, while profit-taking in ITC, Dr Reddy’s and Nestle limited the rise, but only marginally, according to BSE data. On the NSE, the Nifty too closed at a new life-high level of 17,823, up 276 points on the day.
Market players said that the statements by US Federal Reserve chief Jerome Powell that the central bank would slowly bring an end to its bond-buying programme, called tapering, and not raise rate of interest in a hurry, gave clarity among global investors. This, in turn, led to the record-breaking rally on Dalal Street on Thursday. Reports that Chinese authorities were working overnight to limit the contagion of the debt crisis in its real estate sector from spreading to other segments and countries also helped global investor sentiment, they said.
As a result, the sensex opened more than 400 points higher and rallied through the session close to the psychologically vital 60k mark in late trades on Thursday. Thursday’s rally also pushed investors’ wealth, measured in terms of BSE’s market capitalisation, to a record high at Rs 264 lakh crore, or about $3.6 trillion — a level very close to that of the UK’s. Last week, India had surpassed France to become the sixth largest country in terms of market capitalisation.
According to Geojit Financial Services head (research) Vinod Nair, global markets tempered optimism despite a slightly hawkish tilt by the US Fed that said that the US central bank will begin reducing its asset purchases in November and conclude the tapering process around mid-2022. “However, investors continue to remain on edge, awaiting clarity on the Chinese economy. The domestic reality sector continued its rally sparked by demand revival in the property space,” Nair said.
Traders said that the rally on D-Street is expected to continue on Friday after US markets opened strong and continued their rise, boosted by the US Fed’s statement on Wednesday night. In mid-session, the Dow Jones index was up 1.6%, while S&P 500 was up 1.4% and Nasdaq Composite up 1%.

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