By Bharath Rajeswaran
BENGALURU (Reuters) -Indian shares rose marginally to record highs on Wednesday, led by financials which overpowered the drop in information technology stocks ahead of the U.S. Federal Reserve’s rate decision.
Both the NSE Nifty 50 and S&P BSE Sensex rose about 0.2% each to record levels, as of 10:57 a.m. IST.
High-weightage financials added 1.2%, outpacing the 3% drop in IT stocks. The pharma index shed 0.5%. IT and pharma companies depend on the U.S. for a significant part of their revenue.
“Domestic markets are continuing their positive momentum, with the likelihood of the Fed rate cut bringing optimism,” said Siddhartha Khemka, head of research of wealth management at Motilal Oswal Financial Services.
While the Fed is widely expected to lower rates, the size of the cut, whether 25 basis points or 50 bps, was still not clear. The odds of a 50-bps cut climbed to 65% from 34% last week.
While a bigger cut will likely see foreign funds shifting to emerging markets such as India in search of higher returns, it has prompted fears that the Fed may have begun its easing cycle a little too late, at the cost of economic growth.
The Fed’s reason for its decision and commentary on future policy will likely influence the near-term trajectory of Indian equities in terms of foreign inflows and the outlook for the IT and pharma sectors.
Among individual stocks, Infosys slid 3% after Macquarie said the IT firm will continue to lag rival Tata Consultancy Services. TCS also dropped 2.7%.
Torrent Power rose 2.5% on a letter of intent for a 1,500 megawatt pumped hydro storage project in the state of Maharashtra.
Emcure Pharma rose 4% after Kotak Institutional Equities started coverage with “buy”, citing likely sustained earnings growth.
India’s currency and debt markets are closed for a holiday.
(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Savio D’Souza, Nivedita Bhattacharjee and Sumana Nandy)
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