Investors shrug off taper talk, Sensex nears 60,000

THE BSE SENSEX SURGED 958.03 POINTS, OR 1.63%, TO 59,885.36, WHILE THE BROADER NATIONAL STOCK EXCHANGE’S NIFTY INDEX JUMPED 1.57% TO 17,822.95 ON THURSDAY

MUMBAI: India’s benchmark Sensex came within sniffing distance of the 60,000 milestone on Thursday as stocks rallied to fresh highs after concerns about payment defaults by China’s Evergrande eased.

Investors reacted calmly to the US Federal Reserve’s commentary that it will start reversing its stimulus programme in November, throwing none of the tantrums that were visible when the Fed decided to taper its bond-buying programme in 2013. The Fed’s abrupt policy shift then sent emerging market stocks and currencies crashing.

The BSE Sensex surged 958.03 points, or 1.63%, to 59,885.36, while the broader National Stock Exchange’s Nifty index jumped 1.57% to 17,822.95 on Thursday.

Analysts said the market’s response to the Fed’s stance was surprising but indicative of the strong bullish undercurrent. The markets took the US Fed statement on tapering in its stride, said Devang Mehta, head of equity advisory at Centrum Broking. “Encouraging news on Evergrande also helped clear some uncertainty on the global front,” Mehta added.

Equities in other Asia-pacific countries were mostly higher, with Hong Kong’s Hang Seng index rising 1.19% and the Shanghai Composite Index in China advancing 0.38%.

Fed chair Jerome Powell said the central bank will start tapering asset purchases and conclude the process around the middle of 2022 if the economy continues to show strength.

It held its current target interest rate steady in a range of 0% to 0.25%. The Fed expects inflation to remain elevated above its 2% target for four straight years.

“We expect the Fed to act on the dovish side of the median of the new projection, as chairman Powell most likely favours hiking rates in 2023. The more hawkish outcome of the FOMC meeting is seen as a sign of strength that the US economic recovery and reflation of the economy is on the right path. The indicated more aggressive interestrate path is supportive for the dollar in the short term,” said David Kohl, chief economist, Julius Baer.

Typically, higher interest rates in the US trigger a flight of foreign funds from emerging markets. .