Bull run on Dalal Street: Why Sensex surged over 700 points today

The US Fed's decision to keep interest rates unchanged while hinting at three potential rate cuts throughout the year caught many by surprise, igniting a global rally. Investors in the domestic market were quick to react, fuelling the surge on Dalal Street.

The Fed's unexpected clarity on its interest rate trajectory provided a significant boost to rate-sensitive sectors such as information technology (IT) and banking stocks. Additionally, metal sector stocks witnessed substantial gains due to the softer US dollar.

Avinash Gorakshakar, head of research at Profitmart Securities, told news agency Reuters that the domestic markets were caught off guard by the Fed's explicit guidance on rate cuts. This unforeseen clarity from the US central bank reverberated across global markets, propelling the Indian stock market into a bullish trajectory.

While the anticipation of a rate reduction in June has intensified following the Fed's latest remarks, analysts caution against prolonged exuberance.

Despite the short-term optimism fuelled by the Fed's commentary, concerns loom over elevated valuations in the market. Analysts suggest that while the near-term outlook may benefit from the Fed's stance, sustained valuation concerns in the longer run may challenge bullish momentum.

Simply put, the surge in domestic stock markets on Thursday reflects the positive spillover effects of the US Federal Reserve's unexpected guidance on interest rates.