The Indian stock market indices, Sensex and Nifty50, are bracing for a lower opening on Thursday, reflecting the prevailing weakness in global markets. This caution follows a significant announcement by Jerome Powell, Chair of the US Federal Reserve, signaling a hawkish shift in monetary policy.
In a unanimous decision, the US Federal Reserve opted to maintain the benchmark interest rates at a 22-year high of 5.25% to 5.5%. However, they hinted at a potential rate hike later in the year. Powell emphasized that the Fed is “prepared to raise rates further if appropriate” and intends to maintain a restrictive policy stance until confident about inflation trending down sustainably.
Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services Ltd., commented on the situation, stating, “We expect the market to remain cautious in the near term amid major events, while profit booking in the broader market is likely to continue. Apart from the US Fed rate outcome, two other large central banks, i.e., BOE & BOJ, are scheduled to announce their policy decisions on Thursday.”
Key Global Market Cues for Sensex Today:
Asian Markets: Asian markets witnessed declines, echoing the overnight dip in US stocks triggered by the US Fed’s interest rate decision. Australia’s S&P/ASX 200 slid by 0.21%, Japan’s Nikkei 225 fell by 0.44% as the Bank of Japan commenced a two-day monetary policy meeting, South Korea’s Kospi decreased by 0.5%, and Hong Kong’s Hang Seng index futures indicated mixed signals.
Wall Street: In the US, stock market indices ended the day in the red. The Dow Jones Industrial Average dipped by 0.22%, the S&P 500 declined by 0.94%, and the Nasdaq Composite saw a 1.53% decrease. Despite this, Klaviyo shares had an impressive debut on the New York Stock Exchange with a 9.2% rally. Conversely, Maplebear plummeted by 10.7%, and Arm Holdings shares fell by 4.1%. Pinterest’s share price gained 3.1% following an announcement of a $1 billion share buyback, while Coty shares rose by 4.4% as the CoverGirl parent raised its annual core sales forecast.
US Fed’s ‘Hawkish Pause’: While keeping interest rates steady, the US Federal Reserve announced its unwavering commitment to a hawkish stance. Powell stated that the Fed is willing to raise rates further if necessary and will maintain a restrictive policy until confident about inflation moving towards the desired levels.
US Treasury Yields Soar: US two-year Treasury yields surged to a 17-year high of 5.1970% after the Fed’s hawkish stance. The 10-year yield also reached a 16-year peak at 4.4310%. The central bank’s projections point to future rate hikes and a significantly tighter monetary policy.
US Dollar Strengthens: The US dollar index, measuring the currency against a basket of rivals, hit a high not seen since March 9 at 105.59. This robust performance is fueled by resilient US growth and marks the dollar’s longest winning streak in nearly a decade. The Japanese yen weakened, and the euro and sterling faced declines against the greenback.
In this climate of global economic uncertainty, investors in the Indian stock market will be closely watching the outcome of central bank policy decisions and international market developments, with a keen eye on potential impacts on their portfolios.