Sensex Rises Over 500 Points On Hopes The Fed Becomes Less Hawkish

Indian equity benchmarks rose on Monday, extending gains for the third week, tracking a positive start to the week for Asian bourses on expectations of major central banks adopting a less hawkish approach and retreating oil prices.

The NSE Nifty-50 index rose 164.25 points, or 0.92 per cent to 17,94760, and the Sensex index rallied 591.12 points, or 0.99 per cent, to 60,550.97, extending their gains for the third straight session.

As of Friday’s close, they have gained more than 4 per cent for the month, supported by robust corporate earnings reports and expectations that the Federal Reserve pivots away from its ultra-aggressive tightening path.

While the Fed is expected to take rates higher, expectations have increased for the US central bank to turn less hawkish, boosting global risk assets.

Gains in Korea, Australia, and Hong Kong helped MSCI’s index of Asia-Pacific equities outside Japan higher on Monday.

But the broader MSCI Asia index is expected to post its ninth consecutive monthly loss after China stocks declined in response to dismal economic data. Nikkei in Japan rose 1.5 per cent.

That comes after gains on Wall Street on Friday, but the bonds and currency markets have muted some bets on the Fed changing its tone.

“Things had gotten too pessimistic,” Jun Bei Liu, a Portfolio Manager at Tribeca Investment Partners in Sydney, told Reuters about the stocks rally. She suggested that recent declines in US tech stocks may indicate that the market has already priced in enough bad news.

“The valuation crunch for a lot of those companies is already done…we’re already getting earnings downgrade, and now the market is starting to look attractive in certain sectors,” she added.

Oil prices dropped on Monday amid worries that China’s expanding COVID-19 curbs may reduce demand.

India, the third-largest oil importer in the world, benefits from the decline in prices because it lowers imported inflation.

This week, investors will be monitoring the outcomes of policy meetings held by the Bank of England and the US Fed and a surprise meeting of the Reserve Bank of India (RBI).

On November 3, the RBI has planned a second off-cycle meeting of its policy-making committee this year to debate how to respond to the government’s repeated inability to fulfil its inflation target.