US Fed move boosts global bourses, Sensex up 362 pts

Global markets, including India, rallied sharply on Thursday after an economic assessment by the US Federal Reserve ignited investor hopes that the world’s largest economy

Global markets, including India, rallied sharply on Thursday after an economic assessment by the US Federal Reserve ignited investor hopes that the world’s largest economy has warmed to the idea of lowering short-term interest rates. The BSE Sensex jumped 362.15 points (2.8 per cent) to settle at 13,308.03, its highest closing since February 27, 2007 — the highest closing in more than three weeks.

It was the Sensex’s biggest daily gain since March 8, 2007 when the benchmark index had vaulted 469.60 points (3.7 per cent) to 13,049.35, tracking a rally across Asian markets. Key benchmark indices in Asia were up between 0.39-2 per cent on Thursday. On Wednesday, the Dow Jones industrial average shot up 159.42 points to 12,447.52 following the Fed move to keep the rates steady. The Standard & Poor’s 500 Index jumped 24.1 points to 1,435.04. The Nasdaq Composite Index surged 47.71 points, or 1.98 per cent, to 2,455.92.

Investors across the world had awaited the economic statement that accompanied the Fed’s decision to leave short-term interest rates unchanged at 5.25 per cent, and they were encouraged that the central bank did not refer to the possibility of “additional firming” of rates as it did in January.

Story continues below this ad

“Normally rate hikes in the US tend to drain cash from emerging markets as big US funds will put money in high-yield US instruments. When rates are slashed in the US, money will flow to developing economies like India,” said BSE dealer R A Poddar.

“It does have the feel now that the stock sell-off is over,” said Patrik Schowitz, global strategist at HSBC. “People are clearly more concerned about interest rates than growth. We’re not going to see more out of the Fed unless growth disappoints massively or inflation rises strong.”

The market was also relieved that the US central bank left in place language in its statement that it still expects the economy to “continue to expand at a moderate pace.” The Fed’s reflections on the economy served as a calming voice on Wall Street after growing unease about economic growth worldwide sparked a February 27 sell-off that saw a 416-point drop in the Dow and its domino effect on other emerging markets.