While the market had expected the US Federal Reserve's decision to pause, the commentary delivered by Fed chief Jerome Powell took a somewhat dovish tone, contrary to market fears. Powell's statement about long-term inflation expectations remaining stable, despite elevated inflation, was interpreted as a sign that the Fed may not raise interest rates further in this current cycle. As a result, bond yields experienced a significant 17 basis point drop to 4.75 percent, and equity markets reacted positively.
In the short term, the dollar index at 106.3, Brent crude at around $85, and the 10-year US bond yield at 4.75 percent create favorable conditions for the stock markets. This could potentially lead foreign institutional investors (FIIs) to shift from being sellers in October to becoming buyers, driving a short-covering rally, even in the midst of uncertainties surrounding the Israel-Hamas conflict.
From a valuation and growth perspective, leading banks present attractive buying opportunities, and the IT sector might make a comeback. On Thursday, the BSE Sensex rose by 444 points to reach 64,035 points, with Indusind Bank seeing a 2 percent increase and Sun Pharma, HCL Tech, and SBI each experiencing a 1 percent gain.
(With Agency Inputs)