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Nifty likely to open in red; Fed may keep rates low for now

Power Breakfast

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The Nifty is likely to open in the red, with indicator SGX Nifty trading at 7957.50, down 32.50 points. On Wednesday, the 30-share BSE Sensex climbed 138.78 points to close at 26631.29 and the 50-share NSE Nifty rose 42.60 points to 7975.50.  The broader markets too gained with the BSE Midcap and Smallcap indices rising 0.3 percent each.

The US market closed marginally positive, paring gains after Janet Yellen’s clarification that the timing of rate hikes will be highly conditional and based on the Fed’s assessment of the economy. In other asset classes, the dollar index rallied exerting pressure on commodities like crude and gold.

Stocks rose, with the Dow ending at a record and the S&P 500 back above 2,000 after the Federal Reserve said it was nearing the end of its asset purchases and reiterated it would not hike interest rates for a ‘considerable’ period. However, they pared some gains after Janet Yellen clarified that the timing of rate hikes will be highly conditional.

The Fed left largely intact key provisions and cut its bond buying down to USD 15 billion a month, while indicating the asset purchases would end altogether in October.

Also, in less than 24 hours, the people of Scotland will vote on whether they want to remain in the United Kingdom. But top banks and many corporates warn that an independent Scotland may lose out on investments.

Back home, president Xi Jinping is in India with a promise of investing a whopping USD 100 billion. India and China inked three pacts – China will invest USD 10 billion to set up industrial parks in Ahmedabad and Pune. 

Asian shares were mixed on Thursday as slowing property prices in China offset relief over the US Federal Reserve’s accomodative policy stance.

China’s Shanghai Composite was down 0.10 percent or 2.36 points at 2,305.54. Hong Kong’s Hang Seng shed 0.97 percent or 236.14 points at 24,140.27.

Japan’s Nikkei gained 1 percent or 158.92 points at 16,047.59. Singapore’s Straits Times rose 0.19 percent or 6.41 points at 3,302.89.

South Korea’s Seoul Composite declined 0.55 percent or 11.29 points at 2,051.32. Taiwan’s Taiwan Weighted was up 0.19 percent or 17.60 points at 9,212.77.

In Europe, shares closed largely higher. European bank stocks gained ahead of the launch of the European Central Bank’s first targeted long-term refinancing operations. The cheap loan scheme will start on Thursday and is expected to provide banks with up to 400 billion euros of funds.

UK’s FTSE closed flat, hit by uncertainty ahead of the closely fought Scottish independence referendum.

In the currency space, the dollar rose to its highest in over four years against a basket of currencies after the Federal Reserve’s guidance on interest rates highlighted the diverging pathways between the United States and other rich nations.

In commodities, brent crude prices slipped pressured by an unexpected inventory build and a strong US dollar, although the fall was capped by a Libyan oil field closure and strikes in Nigeria.

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