Sensex soars after talk of Fed rate hike ends

Mumbai: The equity market soared higher on Friday tracking gains in overseas equities as concern regarding a faster than expected rate hike by the US Federal Reserve eased after a senior official said that raising interest rate too aggressively could slow the economy too much.

The Nifty scaled 108.35 points or 1.04 per cent to end the day at 10,491.05 while the Sensex soared 322.65 points or 0.95 per cent to end the day at 34,142.15. However, analysts are not too convinced with the pull back rally as they feel that the equity valuations are still expensive despite the steep correction over the last one-month.  

“We find valuations of the Indian market and stocks on the higher side in general despite the recent market correction and believe that the process of normalisation of multiples may have just started. We would expect equity multiples to correct over time if the ongoing global economic recovery leads to higher inflation and bond yields (cost of equity). India faces country-specific ma-cro and political risks over the next few months, which may force faster normalisation” said Kotak Institutional equities in its report.

According to it, any further deterioration in the macro, especially due to inadequate pickup in GST revenues, will spook the bond market. “The market could see a deeper correction in that case,” the report said.   

“The weakening of Indian rupee against the US Dollar is clearly an alarming sign for our market,” said Sameet Chavan, technical analyst at Angel Broking.