Indian equities, rupee surge on hopes of Fed deferring rate cut

Sensex posts 2nd biggest gain of 2015; Rupee climbs to 6-week high

Indian equities rose two per cent, while the rupee climbed to a six-week high against the dollar on Monday, tracking gains in global indices as disappointing US payrolls data raised hopes that the Federal Reserve would defer its planned rate hike till next year. The benchmark BSE Sensex posted its second biggest gain in 2015. Investors' wealth went up by Rs 1.85 lakh crore on Monday.  

US September payroll data rose less than projected, leading market participants to believe that the US interest rate hike would now occur in March next year. A little over a week ago, Federal Reserve Chairperson Janet Yellen had indicated the central bank could hike interest rates by December on expectations that US inflation would gradually move up to two per cent.

“Market participants are now thinking that the rate hike is more likely next year than this year, which means the emerging markets are going to be okay, at least for the moment,” said Andrew Holland, chief executive officer, Ambit Investment Advisory.

Market experts said the government would have to push ahead with reforms to revive investor confidence so that India could withstand the global turbulence triggered by fears of a Chinese slowdown and a US interest rate hike.

The Central bank’s unexpected rate hike last Tuesday had lifted the market mood, with benchmark indices gaining 1.4 per cent last week.

On Monday, the 30-share Sensex rose 2.1 per cent, or by 564.6 points to 26,785. The 50-share Nifty closed at 8,119, up 168.4 points, or 2.1 per cent. The rupee closed at 65.3 to a dollar compared to its previous close of 65.51.

Foreign institutional investors bought shares worth Rs 649 crore on Monday, while domestic institutional investors bought shares worth Rs 365 crore, provisional data showed. In August, overseas investors pulled out a record Rs 17,200 crore from the Indian market, while in September they took out Rs 5,695 crore. The Sensex had slid 5.9 per cent in the three months to September, its steepest quarterly loss since 2011.

“There was optimism the government might extend export incentives to large players in pharmaceuticals, chemicals and electronics. Appreciation of the rupee supported the sentiment,” said Jayant Manglik, president, retail distribution, Religare Securities.

Key Asian indices ended up on Friday, with the Jakarta Composite gaining the most at 3.2 per cent. The Nikkei and Hang Seng indices gained more than 1.5 per cent each. The Strait Times index bucked the trend and slid 0.58 per cent.

European indices were trading in the green as well. The FTSE, DAX and CAC were up between 2.11 per cent and 3.07 per cent at 4.30 pm IST.

Back home, the market breadth was strong with 2,001 advances against 792 declines on Monday. Twenty-six of the 30 Sensex stocks ended in the green. The 12 BSE sectoral indices ended up, with the BSE Capital Goods and BSE Bankex indices advancing the most by 3.28 per cent and 2.8 per cent, respectively.

Lenders to the power sector such as Power Finance Company and Rural Electrification Corp saw a sharp rally in their stock prices on reports that state governments might take over the debts of power distribution companies. Metal companies rallied on a rebound in commodity giant Glencore's stock price.