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Sensex Continues Momentum, Global Markets Rise, and Top Stocks in Action
Tue, 28 Aug Pre-Open

On Monday, share markets in India opened on a positive note and ended the day at new highs after a positive day of trading.

The BSE Sensex closed higher by 442 points to end the day at 38,694. While the broader NSE Nifty ended the day higher by 135 points to end at 11,692.

Among BSE sectoral indices, power stocks rose the most by 2.4%, followed by bank stocks at 1.7%. Power Grid Corp, ICICI Bank and Bharti Airtel were among the top gainers.

Top Stocks in Action Today

Jet Airways share price is likely to be in focus as the board of the company considered cost reduction initiatives and its turnaround plan along with June quarter results yesterday.

Sun Pharma share price is among the stocks to watch today after it was reported that the US Food and Drug Administration (USFDA) is set to conduct an inspection at Sun Pharma's Halol facility in Gujarat.

The site produces multiple dosage forms - from tablets to ointments to injectables - and was cleared by the US drug regulator in June, almost three years after a comprehensive remediation process was initiated.

Note that, the USFDA inspection at Halol in 2015 had resulted in 23 observations - a set of deficiencies in the manufacturing processes. The next inspection in 2016 resulted in nine observations and the last one conducted in February this year had cited three observations.

Fed Chairman's Speech Spurs Global Markets

US stock futures hit a record high today after US Federal Reserve Chairman Jerome Powell said that a gradual approach to raising rates remains appropriate to protect the US economy and job growth.

Asian and European indices followed suit and traded on a positive note.

On Friday, Powell said that he expects a slow but steady rate of interest rate increases to continue.

In his closely watched speech at the Fed's annual retreat at Jackson Hole, Powell expressed confidence in the economy and said he does not see inflation getting out of hand. He said that the central bank is focused squarely on not stepping in to halt economic momentum but also wants to be a bulwark against runaway growth.

Powell said the current conditions warrant the gradual approach to raising interest rates.

He said that the economy is strong, inflation is near the 2% objective, and most people who want a job are finding one. He also expressed that the Fed carefully monitoring incoming data, and it is setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2%.

Note that with the US economy chugging along for many months, the Fed is now gradually easing off the stimulus it provides to the economy by raising interest rates to more normal levels.

How does a US interest rate hike affect Indian investors?

The instant effect is foreign money moving out of India's vaults. This means a slight correction in the share market in India, albeit temporarily.

While this might provide a good buying opportunity in long-term stocks, the main thing to look forward would be capex and earnings trends.

In the end, Indian investors are better off staying informed about the corporate earnings revival than Fed rate hikes.

It is also worthwhile to note that the Indian stock market has done relatively well during the last period of rate hikes by the US Fed.

Take 2003-2006 for example...

Between 2003 and 2006, the US Fed rate moved from 1% to 5.25%.

Despite this, the Sensex rose from 3,500 levels to more than 10,000 during the same period. This increase was supported by strong earnings growth.

So, in the long term, rate hikes (triggered by economic growth) have proved good for the Indian markets. In fact, earnings growth is at the heart of Tanushree's prediction of Sensex 100,000.

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