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Fed flavour in Friday fortune

Mumbai, June 30: Till some time back, he was blamed for the meltdown in the stock markets, but on Friday Fed chief Ben Bernanke found himself in a different position. Elated over the possibility of the US Federal Reserve cutting short its rate-hike trip, markets across all the asset classes surged. The BSE sensex rose a whopping 447 points, while the rupee gained 24 paise against the dollar. Gold shot up by Rs 230 per 10 gram to Rs 8,985.

The Federal Open Markets Committee (FOMC) of the US Federal Reserve had yesterday raised the target fed funds rate by 25 basis points for the 17th consecutive time to 5.25 per cent. However, in doing so, it gave a strong indication that the interest-tightening measures that were initiated in June 2004 would soon come to an end.

Buoyed by hopes that foreign investors would not migrate from emerging markets, Asian stocks rose in unison. This was after the Dow Jones Industrial Average flared up by 217.24 points on Thursday, the biggest gain since March 2003. The Nasdaq composite index advanced by 62.54 points, its biggest percentage rise since March 2004. In the Asian markets, the Nikkei ended up 384.03 points, the Hang Seng by 402.40 points, the Singapore ST index by 48.62 points and the Kospi by 32.13 points.

Amid such positive global cues, the sensex began with a gap at 10316.12 and gradually moved upwards to the intra-day high of 10626.84 before ending the day at 10609.25 against yesterday’s close of 10162.16, a net rise of 447.09 points, or 4.4 per cent. This is the third largest gain in absolute terms after June 9 and 15.

The National Stock Exchange’s S&P CNX Nifty also zoomed 130.30 points, or 4.35 per cent, to 3128.20 from the previous close of 2997.90. Broking circles said today's rally was virtually across the board with all the sectoral indices ending in the green. Among the various indices, it was the BSE metal index that was the largest gainer on account of a rebound in prices of metals.

The FOMC meeting also had an impact on the forex markets where the rupee surged against the dollar as the greenback came under pressure against other currencies as well. Boosted by hopes that foreign institutional investors would make a strong comeback to the equity markets, the Indian currency today ended steeply higher at 46.05 per dollar from the last finish of 46.29.

The Indian unit opened sharply higher at 46.14 per dollar from an overnight close of 46.29 and after rallying further to the day's high of 46, ended at 46.05.

On the Mumbai bullion market, gold prices shot up by Rs 230 per 10 gram following the steep fall in dollar against other major world currencies. Silver also made an handsome advance of Rs 605 per kilo in line with the yellow metal.

Standard gold (99.5 purity) opened sharply firm at Rs 9,005 per 10 gram, but later surrendered part of the early gains to fresh profit-selling and ended at Rs 8,985, still revealing a rise of Rs 230 over yesterday’s close of Rs 8,755.

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