Stocks and currencies in emerging markets, including India, led an Asian rally Thursday following a surprise decision by the US Federal Reserve to keep its massive stimulus programme intact.
The benchmark index of the Bombay Stock Exchange, the Sensex, spurted 574 points, or nearly 3%, in early trade on Thursday on sustained buying by funds and retail investors. The rupee also firmed up against the dollar.
The US Fed’s announcement to hold off winding down its $85 billion a month bond-buying fuelled an overnight buying spree on Wall Street, sending the Dow and S&P 500 to record highs. And Asia took up the baton Thursday, with under-pressure developing economies breathing a sigh of relief after suffering a heavy sell-off in August as investors bet on the Fed tightening its monetary policy.
The 30-share Sensex, which had gained nearly 230 points in the past three sessions, rose further by 574.13 points, or 2.88%, to 20,536.29 points with banking, realty, capital goods and auto sector stocks leading the rally. The broader Nifty index on the National Stock Exchange rose 183.65 points, or 3.11%, to 6,083.10.
At 2.20pm on Thursday, Sensex was trading up 701.27 points at 20663.15 and Nifty up 225.45 points at 6124.36.
The Indian rupee also zoomed by 158 paise to trade at over one-month high of 61.80 against the dollar at the Interbank Foreign Exchange market on hopes of increased capital inflows after the US Fed’s decision to keep its stimulus measures going. The rupee had plumbed to all-time record lows earlier this month as fears surged that a Fed pullback would send waves of capital flowing out of the region.
In an eagerly awaited announcement, the Fed said it would keep the stimulus in place as it wanted to further gauge the economic impact of public spending cuts and a spike in interest rates in the past four months.
Instead it cut its growth forecast for this year and next as chairman Ben Bernanke warned of possibly "very serious consequences" from a brewing political battle in Washington over a new budget and the US debt ceiling.
"The Federal Reserve's policy is to do whatever we can to keep the economy on course. And so if these actions led the economy to slow, then we would have to take that into account, surely," he told reporters.
He said the bank could still start reducing the bond-buying -- which aims to hold down long-term interest rates -- in the next three months, but only if the economic outlook improves.
"There is no fixed calendar," he said.
Wall Street welcomed the announcement. The Dow rose 0.95%, the S&P 500 climbed 1.22% and the Nasdaq was up 1.01%.
In Asia, the benchmark index for Jakarta rose 4.44% in early trade Thursday, Manila gained 3.16%, and Bangkok added 3.20%. There were also gains for Tokyo, which added 1.57%, while Hong Kong jumped 1.71% and Sydney rallied 1.06% to a five-and-a-half-year high. Seoul, Shanghai and Taipei were closed for public holidays.