Powell Ahoy! Beaten down SMid caps get a Fed boost

Analysts said if the Nifty sustains over the 22,000 levels in the next few trading sessions, there could be a rally in the run-up to the elections.

Agencies

The markets were oversold in the run-up to the Fed meeting and there is uncertainty whether the markets can sustain the rebound, they said.

"Markets were in an oversold zone prior to the Fed meeting outcome," said Neeraj Chadawar, head-fundamental and quantitative research at Axis Securities. "Since the outcome was anticipated, there was an immediate recovery today post Wednesday's corrections."

On Wednesday, the Fed kept the policy rate unchanged at 5.25-5.5% in line with expectations. What cheered markets globally was that the majority of central bank's policymakers continued to see three 25 bps rate cuts in 2024. Several investors had toned down their expectations on how many times the Fed would cut rates this year in the wake of stronger-than-expected inflationary readings in recent months.

Easy monetary policy in the US has been good news for emerging markets like India in the past. Interest rate cuts could lead to a weaker dollar and declining bond yields, driving more flows into Indian markets.

Investors should monitor the US bond yield and crude oil prices for the next one month to determine whether the rally will sustain, said Chadawar. "If the US bond yield remains muted, it will offer markets a breather," he said. "On the other hand, if there is any up move in the yields then it could lead to volatility in the markets."

PSU stocks were among the top gainers with Nifty PSE Index up 3.51%. , , and gained over 3% each.

The Nifty Midcap 150 surged by 2.26% and Nifty Smallcap 250 by 2.26%. In the past month, both indices have fallen by 3.03% and 6.3%, respectively. Foreign investors net sold shares worth ₹1,826.97 crore while domestic institutions were buyers to the tune of ₹3,208.87 crore.