Millennium Post

US shutdown ends, our markets start partying

The National Stock Exchange of India’s (NSE) 50-share CNX Nifty flew by 143.50 points (2.37 per cent) to 6,189.35, the highest level since November 11, 2010, when it had reached 6,194.25.

There was value buying across the board, triggered by global cues as concerns about the US tapering eased and China’s economic growth picked up. Many analysts said that the Indian capital markets may remain buoyant for some time now as an after-effect of the shutdown of the US government, which ended on Wednesday to the relief of the whole world.

According to initial estimates, the 16-day shutdown cost the American economy $24 billion and will shave off 0.6 percentage point from that country’s growth rate for the calendar year 2013. Considering that the USA’s gross domestic product (GDP) last year (2012) was an astronomical $15.68 trillion — representing a 2.2% growth rate — a drop in the expansion rate of the world’s largest economy by even 1 percentage point represents huge numbers.

Thus, the US Federal Reserve Board (Fed), the country’s monetary policy regulator, is unlikely to begin a withdrawal of the $85 billion-per-month monetary stimulus programme — technically known as quantitative easing (QE) — in the near or medium term as such a move might raise US interest rates  and dampen both aggregate investment as well overall sentiment about the American economy, further jeopardising its now precarious recovery.

This news is being cheered by capital markets of emerging economies like India as it is likely to ensure reasonably large inflows of liquidity from American shores, as that country will continue to experience massive monetary injections by the Fed.

On Friday all 13 Bombay Stock Exchange (BSE) sectoral indices advanced, led by bank and metal shares. Sesa Sterlite and Tata Steel were the top gainers as all 30 Sensex shares (except Bajaj Auto) moved up.

At the aggregate level investors on the BSE became richer by Rs 1.07 lakh crore during the week’s last trading day. The market breadth turned positive as 1,406 shares ended with gains, 1,075 shares closed with losses and 171 ruled steady.

Most Asian stocks, too, rose as China’s GDP growth rebounded, dispelling fears of a slowdown in the world’s second largest economy. The Chinese economy expanded 7.8 percent in the July-September quarter, up from a two-decade low of 7.5 percent in the previous quarter.

Indices in Singapore, China, South Korea, Hong Kong and Taiwan were up but Japan’s Nikkei ended 0.17 per cent lower. European stocks traded higher, with the benchmark indices in France, Germany and the United Kingdom all up.
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