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Why Nifty, Sensex, Bank Nifty rose today; What is boosting investors’ confidence amid global banking contagion

22 Mar , 2023   By : Monika Singh

Why Nifty, Sensex, Bank Nifty rose today; What is boosting investors’ confidence amid global banking contagion

Nifty and Sensex surged in morning trade on Wednesday but pared some gains while holding crucial levels as investors awaited US Federal Reserve’s interest rate decision. The NSE Nifty 50 surged 100 pts or 0.6%, hitting an intraday high of 17,207.25; BSE Sensex climbed 350 pts to a day’s high of 58,418.78 and Bank Nifty rose 0.5% to 40,085.60. US Federal Open Market Committee (FOMC) will announce their decision today, late evening. Analysts attribute today’s rise to additional funding and buy-out measures by the US and European governments to calm down investors, giving hints that the banking crisis may have come under control.

Why are markets up today? Is the global banking crisis under control?

“The rally is led by the reassuring sensation that the rout of the US & European banking sectors is under control. Additional funding and buy-out measures ensure that the worst is behind us. However, the post-syndrome and slowdown in the economy will affect credit growth and profitability in short to medium term. The continuity of the rally will also depend on the moderation of the monetary policy stance from hawkish to neutral and a drop in the inflation trend,” 

Impact of US Fed interest rate decision on Nifty, Sensex

“Ahead of US Fed’s announcement of a likely increase in interest rates, foreign institutional investors (FIIs) have started pulling out of Indian and other emerging equity markets. We are a major importer of crude oil, and continuous selling by FIIs results in rupee depreciation and a higher import bill. This, in turn, has a negative impact on our current account balance. The Indian market can be described to be on a rather independent trajectory of its own. Depreciation of the Indian rupee should actually help raise exports from India, thereby bringing in greater revenue for Indian domestic producers. GST collections, fuel consumption etc. have been healthy throughout so the impact on the Indian equity market and emerging market is expected to be nominal,”

Gold prices retreat as stocks rise

“Gold prices retreated from a recent high because of the government intervention in the banking crisis. The safe haven rally in gold paused for the near term as the FOMC meeting outcome is to be released later in the day. Government intervention in the banking crisis may encourage Fed to continue its fight against inflation at the same pace and may put pressure on gold in the near term. However, growing pressure on the global economy amid the banking crisis and uncertainty may keep the downside limited in gold. Gold has resistance at 59500 and support at 57800,”

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