Indian equities are expected to extend rally on Thursday. On Wednesday the benchmark Sensex reclaimed the 40,000-mark for the first time since 5 July. The 30-share BSE Sensex is just 260 points shy of its record 40,312.07 touched on 4 June while the Nifty is only 258.95 points away from its all-time high of 12103.05 hit on 3 June.
Asian shares rose on Thursday and US stock futures edged higher after the US Federal Reserve cut interest rates as expected to keep economic expansion on track. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.2%. Japan’s Nikkei stock index rose 0.41%, but Australian shares fell 0.24%.
US Treasury yields extended declines in Asia after the rate cut, but further declines may be limited as Fed Chairman Jerome Powell signalled additional rate cuts are unlikely because there are several areas of strength in the US economy.
The yen held steady versus the dollar before a Bank of Japan policy meeting later on Thursday. The BOJ is expected to keep its ultra-easy monetary policy in place, but the decision could be a close call. Debate at the Fed and the BOJ highlights the struggle that many central banks are facing.
The US China trade war and Britain’s divorce from the European Union have increased uncertainty, but central banks are somewhat reluctant to ease policy aggressively because interest rates are already very low in many major economies.
The Fed lowered its policy rate to 1.50%-1.75%, but dropped a previous reference in its statement to “act as appropriate” to sustain the economic expansion. In his news conference, Powell listed several reasons why he feels the economy is doing well, such as robust consumer spending, strengthening home sales, and healthy asset prices.
Back home, telecom stocks are likely to be in focus again. According to a Mint report, Reliance Jio Infocomm Ltd, one of the three core members of the Cellular Operators Association of India (COAI), objected to the lobby group seeking relief for the telecom sector and claimed that the group’s plea to the government does not represent the view of the industry.
COAI’s petition came after the Supreme Court ordered legacy telecom companies to pay up ₹92,000 crore in dues, rejecting Bharti Airtel Ltd and Vodafone Idea Ltd’s plea that the government’s revenue share be calculated excluding income from non-core operations such as rent, dividend and interest income.
State Bank of India (SBI) chairman Rajnish Kumar on Wednesday pitched for a higher valuation of the bank’s enterprise value, asking analysts to take into account the growth prospects of its subsidiaries, as well as forecasts of a better-than-expected performance in 2020-21. Kumar said the bank’s performance is set to improve from FY21, following an improvement in asset quality and better growth.
Meanwhile, the yield on benchmark 10-year US Treasury notes fell to 1.7838% in Asia on Thursday, while the two-year yield eased slightly to 1.6076%. The dollar index against a basket of six major currencies fell 0.22% to 97.427, extending declines from Wednesday.
The yen was little changed at 108.80 per dollar as traders awaited the outcome of the BOJ meeting.
Japan’s central bank may trim its consumer price forecasts but leave policy unchanged due to hopes that progress in scaling back a U.S.-China trade dispute will give it room to save its dwindling policy tools.
Optimism that Washington and Beijing will sign a preliminary agreement to call a truce to their 16-month trade war was also a factor behind the Fed’s decision to signal that further rate cuts are on hold, highlighting the importance of trade talks to global monetary policy.
In the energy market, oil futures extended declines on Thursday as a massive buildup in US crude stock piles reinforced concerns about oversupply in the world’s energy markets.
