Sensex reaches a record high as Nifty crosses 25,000 for the first time. The Nifty closes at 25,000 or above with a day high of 25,078.30.
The domestic stock market indices experienced gains as the US Federal Reserve decided to keep the rates unchanged at 5.25-5.5 per cent during its July meeting for the eighth consecutive time. However, the Federal Reserve indicated a possible rate cut in September.
On Thursday, the domestic stock market reached new highs, with the Sensex surpassing the 82,000 level and the Nifty crossing the 25,000 mark, as investors shifted towards riskier assets in response to the indication from the US Federal Reserve about a potential rate cut in September.
The BSE's 30-share Sensex exceeded the 82,000 mark for the first time in the morning trades on Thursday. The index reached a record high of 82,129.49 after opening at 81,949.68, in comparison to the previous close of 81,741.34.
Why did the markets rally? The domestic stock market indices gained due to the decision of the US Federal Reserve to maintain the rates unchanged at 5.25-5.5 per cent for the eighth consecutive time during its July meeting, while signaling the possibility of a rate cut in September.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated, "The Fed chief (Jerome Powell) signaling a possible rate cut in September is positive for global equity markets. More importantly, his comments that the US economy is normalizing are a shot in the arm for bulls."
Deepak Agrawal, Chief Investment Officer-Debt at Kotak Mahindra AMC, mentioned that the Federal Open Market Committee is attentive to the risks on both sides of its dual mandate and requires greater confidence that inflation is moving towards 2 per cent before cutting rates. Agrawal also stated, "With inflation cooling off and job growth slowing down, the Fed would begin to dial down the tightening done over the last two years in the September 2024 policy and assist in the soft landing of the economy."
Analysts suggested that a rate cut by the US Fed in September would lead to increased investments in emerging markets, including India.
Vijayakumar pointed out that the sharp dip in the 10-year US bond yield to 4.05 per cent might halt and possibly even reverse the foreign institutional investor (FII) selling in the cash market in recent days. He also said, "If both FIIs and DIIs (domestic institutional investors) turn buyers, the market can spurt today. However, sustaining the rally would be difficult since valuations are getting stretched."
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