The Fed said it would buy $40 billion of mortgage securities a month until the US economy improves. Fed's decision would lead to a rise in liquidity in the global economy giving a push to riskier assets like equities and commodities. The central bank also extended its pledge of super-low short-term interest rates into 2015, and extended a program to drive down long-term rates.
The Nifty, which is already trading at a seven-month high, is likely to jump over 100 points or 2 per cent according to futures trade on the Singapore index. The government's decision to hike diesel prices will also cheer markets. Investors have been concerned over the rising subsidy bill because state-run oil refiners have been selling fuel at below market prices. Oil marketing companies were losing Rs 550 crore everyday on under-recoveries as a result of higher crude prices in the global markets.
The government hopes the move will help avert a sovereign credit downgrade, the prime minister's chief economic advisor, C. Rangarajan, said. "The government has shown it can take hard decisions, very difficult decisions."
The cabinet's economic panel is due to meet on Friday to discuss a plan to invite foreign airlines to invest in domestic carriers and a proposal to sell shares of large state-run firms. A Cabinet note - a copy of which has been accessed by NDTV - says that under the FDI proposal, foreign airlines will be allowed to invest in Indian peers, but can only hold up to a 49 per cent stake. Although a 49 per cent stake gives the investors minority shareholder control, they will get the right to block a special resolution.
US markets staged a huge rally Thursday after investors got the aggressive economic help they wanted from the Federal Reserve. The Dow Jones industrial average spiked more than 200 points and cleared 13,500 for the first time since the beginning of the Great Recession. The average is within 625 points of its all-time high.
Asian shares rose to a four-month high on Friday after the U.S. Federal Reserve announced an aggressive new stimulus to drive job creation in the U.S. economy.
The Fed's move will likely accelerate the risk-positive momentum at work since the European Central Bank's bond-buying scheme to get borrowing costs down for euro zone members was approved by Germany's constitutional court.
Japan's Nikkei stock average opened up 1.1 percent.
(With inputs from agencies)