Market Does It Again, Rallies To Hit Record High As Fed Spurs Global Rally; IT Stocks Big Bulls

The Indian equity benchmarks soared to new highs on Thursday, with the BSE Sensex surging 797 points to reach a historic high of 70,381.24, while the NSE Nifty 50 index climbed 222 points to touch a record peak of 21,148.45. The broader market also witnessed positive momentum, with Nifty Midcap 100 rising by 0.81%, and small-cap shares gaining 1.11%. This surge comes in the wake of a dovish outlook from the US Federal Reserve, setting the stage for a potential Santa Claus rally in the Indian markets.

Globally, Asian markets experienced a mostly positive trend, buoyed by the optimism in the overnight Wall Street session, where US equities settled with decent gains.

Foreign portfolio investors (FPIs) displayed strong confidence in the Indian market, buying shares worth Rs 4,710.86 crore during the previous session. In contrast, domestic institutional investors (DIIs) sold shares worth Rs 958.49 crore.

Notably, 12 out of the 15 sector gauges compiled by the NSE were trading in the green. Nifty IT, Nifty Bank, and Nifty Financial Services outperformed the NSE platform, rising by as much as 3.01%, 1.21%, and 1.26%, respectively. However, sectors like Nifty Pharma, Nifty Healthcare, and Nifty Media experienced a dip.

Tech Mahindra emerged as the top gainer in the Nifty pack, jumping 3.73% to trade at Rs 1,261.5 per share. Other notable gainers included HCL Tech, LTIMindtree, Wipro, and Bajaj Finance, which gained up to 3.19%. On the flip side, PowerGrid, BPCL, Cipla, Nestle India, and Sun Pharma found themselves among the top laggards.

Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, shared insights into the market's potential trajectory: "The clear dovish message from the Fed yesterday has set the stage for a smart Santa Claus rally in the coming days, and this can even trigger a pre-election rally that can take the markets to a series of new highs."

He further emphasized that the main beneficiaries are likely to be large caps, especially those in banking, as well as the IT sector. However, he also cautioned about the lack of valuation comfort in mid and small caps, despite potential retail exuberance.

Across the Pacific, in the US, the Dow Jones Industrial Average reached a record high, closing above the 37,000 mark for the first time at 37,090.24. The S&P 500 and Nasdaq Composite also posted gains, crossing 4,700 and 14,733.96, respectively. This surge in US markets followed the Federal Reserve's announcement that it would maintain its key interest rate and signalled multiple rate cuts in 2024.

The Federal Open Market Committee (FOMC) voted unanimously to keep the benchmark overnight borrowing rate in a targeted range between 5.25%-5.5%. Alongside this decision, the committee outlined plans for at least three rate cuts in 2024, reflecting a more dovish stance than previously indicated.

The markets had anticipated the decision to maintain the status quo, but the level of ambition regarding policy easing remained uncertain. This development comes as inflation eases and the US economy continues to show resilience.