NSE Nifty ends at record high ahead of US Fed meeting

MUMBAI: India’s Nifty index closed at a lifetime high on Monday, riding a wave of liquidity that lifted global markets from Australia to the US, ahead of a key meeting of Federal Reserve officials. Expectations that the Fed will leave rates unchanged and an unwinding of tensions over North Korea’s provocative missile tests helped investor sentiment.

The NSE’S benchmark Nifty closed at a record 10,153.10, up 0.67%. The Sensex ended 262.72 points short of its lifetime high of 32,686.48. The 30-share index closed 151.15 points, or 0.47%, higher at 32,423.76.

“Liquidity is the key factor driving the market with strong inflows from domestic investors,” said Hemang Jani, senior vice-president, advisory, at brokerage Sharekhan, owned by BNP Paribas SA. “It’s not just about the valuations going up. With declining interest rates, options for investors are skewed, resulting in higher inflows into equities directly or through the mutual fund route.”

The exuberance was fuelled by what’s happening around the world. South Korea’s Kospi and Hong Kong’s Hang Seng index closed up around 1% each ahead of the Fed meeting on Tuesday and Wednesday.

The Fed is unlikely to raise interest rates this time after having already hiked rates twice this year. While the central bank is widely expected to keep the benchmark rate unchanged, more attention will be on whether officials announce a reduction of its $4.5 trillion balance sheet, Bloomberg reported.

To be sure, the rise in Indian equities in recent times has more to do with the exuberance of domestic investors. While foreign institutional investors have been net sellers of local stocks in August and September, domestic mutual funds and insurance companies bought shares worth ₹33,148.19 crore this month alone. Provisional data from the National Stock Exchange shows that domestic investors invested a net of ₹775.61 crore in Indian shares on Monday.

Indian stocks have delivered the returns in Asia this year barring Hong Kong’s 28%. So far in 2017, the Sensex and Nifty gained 21.77% and 24.03% respectively.

Investors such as Atul Bhole, who manages ₹8.34 lakh crore at DSP Blackrock Investment Managers, is betting that an earnings recovery will happen by the third quarter of this fiscal year owing to firms re-stocking inventory after the 1 July implementation of the goods and services tax.

This “will drive markets ahead,” he said.