Stock Market: US debt ceiling passes Congress test; markets weigh Fed action

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By S Jha

New Delhi, June 1: The US debt ceiling deal was passed with bipartisan support in the Congress, while it will go through the Senate. The US bourses were trending higher on the passage of the debt ceiling deal. Yet, the market participants continue to be cautious over the action of the US Federal Reserve amid strong job data.

Even while the debt ceiling deal is done, with borrowing size squeezed to the discomfort of the ruling Democrats in the US, the Fed is likely to push for rate hikes, which is making the market participants jittery.

Nifty and Bank Nifty cracked on Thursday, the day of weekly option contract expiry, under the weight of the return of the Fed fear. Bank Nifty has cracked the most from the peak seen on Monday, losing over 800 points in quick successions.

The Indian bourses ignored the bullish note of the GDP growth, which beat the expectation of seven per cent to clock a 7.2 per cent growth in 2022-23 fiscal. The March quarter GDP growth was also robust and above estimate. The government also was able to meet the fiscal deficit. Under normal circumstances, the bourses should have gone flying but it was not the case on Thursday expiry as the option sellers managed the day well to their advantage.

The stress in the Chinese economy is also rubbing roughly on the global equity markets. The supply side constraints, principally accounted for by China, may further bring the recovery of the global economy tough.

But the Indian financial numbers are well under control, with GDP growth picking up and inflation well below the projected guidance, helping the rate sensitive sectors gain. The realty sector has consistently been gaining for the past few days, and Thursday was another gain day for the constituents.

Sobha, the Bengaluru-based realty firm, gained over seven per cent. Even while the IT majors have been making moves to gain, the action is happening in the smallcaps.

The likes of Nucleus Software, Newgen Software, Zensar Technology and others made smart gains on the bourses. Even midcaps such as Tata Elxsi continues to make gains on the bourses.

The fund action was muted on Thursday, with financial institutions making marginal buys in the cash market. The Indian economy growth story was also sobered by the fear that the exports could take hits amid global trade compression.