“This definitely sets the ball rolling for the Fed to consider and deviate from the super aggressive rate hikes to mild or status quo policy actions,” said Dhawal Dhanani, fund manager at Samco Mutual Fund.
The Sensex closed at 62,533, up 402 points, or 0.65%, from the previous close. The Nifty advanced 110 points, or 0.6%, to close at 18,608. Both indices are within 1.5-2% of their respective lifetime highs and odds are increasing for them to scale new highs in the sessions to come, analysts said.
“Volatility in the Indian and US markets is stable and hovering at multiple month lows, and indicates the market is not fearful despite key events ahead,” said Chandan
, head – technical and derivatives research, .
So far in December, benchmark indices have slipped about 3% after testing new highs earlier this month. The fall in the Indian IT stocks, mirroring a similar fall in US markets especially tech stocks, dragged the Indian markets lower, analysts said.
Despite the declines, India’s Volatility Index or VIX – a measure of traders’ expectations of near-term risks to the market – has cooled off to 12.88 – the lowest in nearly two years. The VIX had touched a high of 33.97 in March, when the US Fed increased key lending rates for the first time.
“While the mood remains cautious, declines in the market will act as a good buying opportunity for the Nifty to head towards 19,000-19,250 levels with a strong base around 18,000-18,200 levels,” said Taparia.
Foreign portfolio investors (FPIs) were buyers of Indian shares worth a net ₹619.92 crore on Tuesday, showed provisional data from the stock exchanges.
Most of the Asian peers ended positive tracking overnight gains in the US markets, where the Dow Jones advanced 1.6% while the S&P and Nasdaq rose 1.43% and 1.26%, respectively.
The market is pricing-in a 50 basis point increase from the two-day US Fed meeting starting today, lower than the 0.75 basis point rate hikes on the previous four occasions.
“The near-term momentum depends a lot on the US inflation print followed by the US Federal Reserve’s reaction to it,” said Suddep Shah, head – technical & derivatives research, SBICAP Securities.
Shah said the Nifty has been showing early signs of reversal after experiencing some fatigue last week, and continued to hold above the 18,350-18,400 levels. “Till Spot Nifty holds 18,350, a gradual rebound up to 18,750-18,780 can be witnessed,” Shah said.
“Backed by cool-off in India VIX, the market is witnessing sector rotation with increased flows into banking and financial themes, capital goods, cement, FMCG, metals and oil marketing companies with the decline in crude oil prices,” Shah said.
