Ben Bernanke blinked and markets across the world surged. Having plummeted more than most when the US Federal Reserve warned about unwinding its stimulus programme, Indian stocks soared and the rupee staged yet another strong revival, reflecting the stunning turnaround in outlook for foreign inflows into the country after the Fed’s surprise decision not to call time on a yearlong monetary easing programme. Bank stocks catapulted to new highs led by ICICI Bank and State Bank of India and foreign investors streamed back into the market, buying equities worth more than Rs.3,500 crore on Thursday, one of the biggest single-day shopping sprees so far this year. IT stocks such as Wipro fell though as the dollar weakened against major currencies on concerns over the quality of US economic growth. The US Federal Reserve refrained from cutting back its monthly $85-billion bond purchase programme, citing uneven unemployment growth and a stumbling recovery that is below potential five years after the collapse of Lehman Brothers triggered the worst recession since the 1930s. Indian markets and the rupee have been battered by fears of a sharp cut in foreign fund inflow into stocks and bonds after Federal Reserve Chairman Bernanke suggested in May that the programme would be scaled back as the US economic recovery had gathered momentum.
The Sensex rose to a near-three-year closing high of 20,646.64 points, up 3.43%, while the Nifty climbed 3.66% to 6,115.55, a level not seen since this May. The indices have risen 2,079 and 667.45 points, respectively, since September 4 when RBI Governor Raghuram Rajan announced a series of measures to stabilise the rupee and give more freedom to banks. The rupee, Asia’s worst-performing currency till September, rose to a near-one month high of 61.66 before ending at 61.77.
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