D-St cheers weak US economic data

Benchmark indices post highest daily gains so far this year

Weak economic readings in the US and India sparked a rally in domestic stocks on Monday, helping benchmark indices post their highest daily gains so far this year. While the unexpectedly weak employment data in the US revived hopes the Fed would keep its monetary policy loose for a longer period, India’s subdued industrial production data for November raised expectations the Reserve Bank of India (RBI) would keep rates unchanged at its monetary policy review on January 28.

Investors and traders were betting on lower consumer inflation data after trading hours on Monday. And, the Street wasn’t disappointed, with consumer inflation dropping to 9.87 per cent, against market expectations of 10 per cent.

“For markets to sustain at higher levels, good news has to come from RBI. People are thinking due to lower inflation and industrial production data, there will be no more hikes from the central bank. In fact, a small section of the market believes there could be room for a reduction in rates at this policy review,” said Mehraboon Jamshed Irani, principal and head-PCG, Nirmal Bang Securities.

On Monday, the BSE Sensex gained 375 points, or 1.8 per cent, to close at 21,134, while the NSE Nifty closed at 6,272, up 101 points, or 1.6 per cent. The domestic benchmark indices traced gains in other Asian markets, which rose due to the US jobs data released on Friday. “The poor US jobs data has been positive for the markets because investors now feel the tapering could be postponed further,” said Irani.

At its December meeting, the US central bank, encouraged by the improving macroeconomic environment, decided to reduce its bond-buying programme by $10 billion a month from January.

On Monday, foreign institutional investors net-bought shares worth Rs 413.85 crore, according to provisional data. So far this year, they have bought to the tune of Rs 785 crore. Monday’s market rally was led by a rise in technology stocks, especially those of Infosys and TCS, which rose after stellar third-quarter earnings announced by Infosys on Friday. “The good set of numbers by Infosys helped re-rate the entire sector. Stocks in the technology sector moved up on expectations the coming results would be even better,” said Varun Goel, head (PMS), Karvy Stock Broking.

Among technology stocks, TCS was the highest gainer (3.8 per cent), followed by HCL (3.5 per cent) and Infosys (3.3 per cent). Investors also bought oil & gas stocks such as ONGC, Reliance Industries and Oil India. Analysts said the government’s announcement of a new natural gas pricing formula on Friday helped these stocks. Oil India rose 3.6 per cent, ONGC 2.9 per cent and Reliance Industries 2.6 per cent.