 "RBI cut helps market fend off global slide")
The unexpected 50 basis points (bps) rate cut by the Reserve Bank of India (RBI) helped Indian stocks fend off a global market rout which saw $800 billion worth of equity getting wiped out.
The benchmark Sensex ended 161.82 points or 0.6 per cent, to end at 25,778.66. The Nifty 50 added 47.6 points or 0.6 per cent to close at 7,843.3, as rate-sensitive shares gained after the sharp 0.5 percentage point cut in the policy interest rate to 6.75 per cent, lowest in a little over four years.
The Japanese market lost four per cent, Hong Kong’s Hang Seng sank three per cent per cent and China's markets ended a little over two per cent lower, following a sharp retreat in the US markets on Monday, led by a slump in commodity shares on fears of slowing growth in China.
Due to the weak global cues, the Indian markets had opened lower, ahead of the RBI policy announcement. The more than expected 50 bps cut saw the Sensex soar 400 points immediately after the RBI statement. The index gave up these gains soon after, to rebound as global financial markets showed signs of stability. The Sensex rose as much 440 points intra-day but failed to sustain the gains, as foreign investors remained in a 'sell' mode.
The estimate is that foreign institutional investors net-sold shares worth about Rs 1,100 crore. Domestic institutional investors bought shares worth Rs 850 crore.
Rate-sensitive stocks in the banking, automobile and realty sectors reacted positively to the move, which sent yields down in the debt market.
Among blue-chip stocks, the country’s biggest housing finance company, HDFC, gained nearly 3.5 per cent. The biggest passenger car maker, Maruti Suzuki, rallied a little over three per cent. Realty major DLF gained a little above four per cent.
“This is a game-changing event. RBI has done its bit (for growth and investment), with a large cut. The government should now accelerate the reforms process,” said Nirmal Jain, chairman of IIFL Holdings.
Concerns of slowdown in China, the world’s second biggest economy, have caused a lot of pain for the equity market since early August. The Sensex is down nine per cent, while the rupee has declined 3.5 per cent against the dollar since August. In this period, foreign investors have pulled out $3.5 billion (Rs 23,000 crore) from Indian stocks.
Market experts believe RBI's monetary easing will give a needed push to the economy, as it is likely to spur investment activity, boosting India’s appeal among foreign investors. High debt companies will also see an easing of the interest burden.
Sensex to end this year at 27,500
The BSE Sensex is set to rise slightly over the next year but will remain well below the record highs expected only three months ago, a Reuters poll found. Tracking the sell-off in global stocks, Indian shares have lost about nine per cent since August and are nearly seven per cent lower so far in 2015.
The poll of about 35 equity analysts conducted over the past week forecast the Sensex would rise slightly to end this year at 27,500, and reach 29,000 by mid-2016. The index closed on Monday at 25,617.
A poll in June had foreseen the index hitting record highs by the end of both periods. Although equity analysts are generally bullish on India, the rise now forecast for this year is the smallest in any Reuters poll.
Last year, the Indian stock market rose almost 30 per cent and was one of the best performers in the world. The BSE Sensex is forecast in the poll to hit a record high of 32,000 by end-2016, which would be 25 per cent higher from where it is now.
Reuters inputs
Recent turmoil in financial markets on global growth fears, led by weaker-than-expected data from China, has pushed investors out of emerging markets, however, and put a dent in analysts' expectations for Indian shares.
That sell-off in emerging markets was one of the reasons why the US central bank (Federal Reserve) kept rates unchanged last week.
But expectations the US central bank will raise rates this year and a lack of promised reforms from prime minister Narendra Modi's government has made foreign institutional investors to dump Indian shares.
"The policies (reforms) are holding out and the window for the government to act is getting narrower. It is clear that the world will not wait for India for too long," said Ambareesh Baliga, an independent market analyst.
A majority of analysts were of the view that key reforms such as a goods and services tax and land acquisition Bill would be passed, which should lift Indian shares over the coming year.
Modi, who took office in 2014 on promises of introducing reforms that were widely thought to be the missing leg of the Indian growth story, has so far failed to deliver. But 24 of 35 analysts expected the present government to pass those reforms.
Indian central bank governor Raghuram Rajan, who has cut interest rates four times this year to boost growth, said in an interview that India is in a better position to withstand a US central bank's rate increase compared to any other emerging economy.
Indeed, a majority of the analysts polled expect stock markets in China and Brazil to be the most vulnerable to such a move, which US central bank chief Janet Yellen has signalled is coming this year, but which many in financial markets still doubt.
Indications of relatively good economic growth compared to that of rival countries will make India more attractive to foreign and local investors, analysts said.
The economy grew seven per cent in the three months to June, similar to China. But recent data show China is slowing much more sharply than previously expected.
That should help Indian shares, but a lot would depend on the ability of the government to push through key reforms.
The benchmark Sensex ended 161.82 points or 0.6 per cent, to end at 25,778.66. The Nifty 50 added 47.6 points or 0.6 per cent to close at 7,843.3, as rate-sensitive shares gained after the sharp 0.5 percentage point cut in the policy interest rate to 6.75 per cent, lowest in a little over four years.
The Japanese market lost four per cent, Hong Kong’s Hang Seng sank three per cent per cent and China's markets ended a little over two per cent lower, following a sharp retreat in the US markets on Monday, led by a slump in commodity shares on fears of slowing growth in China.
Due to the weak global cues, the Indian markets had opened lower, ahead of the RBI policy announcement. The more than expected 50 bps cut saw the Sensex soar 400 points immediately after the RBI statement. The index gave up these gains soon after, to rebound as global financial markets showed signs of stability. The Sensex rose as much 440 points intra-day but failed to sustain the gains, as foreign investors remained in a 'sell' mode.
The estimate is that foreign institutional investors net-sold shares worth about Rs 1,100 crore. Domestic institutional investors bought shares worth Rs 850 crore.
Rate-sensitive stocks in the banking, automobile and realty sectors reacted positively to the move, which sent yields down in the debt market.
Among blue-chip stocks, the country’s biggest housing finance company, HDFC, gained nearly 3.5 per cent. The biggest passenger car maker, Maruti Suzuki, rallied a little over three per cent. Realty major DLF gained a little above four per cent.
“This is a game-changing event. RBI has done its bit (for growth and investment), with a large cut. The government should now accelerate the reforms process,” said Nirmal Jain, chairman of IIFL Holdings.
Concerns of slowdown in China, the world’s second biggest economy, have caused a lot of pain for the equity market since early August. The Sensex is down nine per cent, while the rupee has declined 3.5 per cent against the dollar since August. In this period, foreign investors have pulled out $3.5 billion (Rs 23,000 crore) from Indian stocks.
Market experts believe RBI's monetary easing will give a needed push to the economy, as it is likely to spur investment activity, boosting India’s appeal among foreign investors. High debt companies will also see an easing of the interest burden.
Sensex to end this year at 27,500
The BSE Sensex is set to rise slightly over the next year but will remain well below the record highs expected only three months ago, a Reuters poll found. Tracking the sell-off in global stocks, Indian shares have lost about nine per cent since August and are nearly seven per cent lower so far in 2015.
The poll of about 35 equity analysts conducted over the past week forecast the Sensex would rise slightly to end this year at 27,500, and reach 29,000 by mid-2016. The index closed on Monday at 25,617.
A poll in June had foreseen the index hitting record highs by the end of both periods. Although equity analysts are generally bullish on India, the rise now forecast for this year is the smallest in any Reuters poll.
Last year, the Indian stock market rose almost 30 per cent and was one of the best performers in the world. The BSE Sensex is forecast in the poll to hit a record high of 32,000 by end-2016, which would be 25 per cent higher from where it is now.
Reuters inputs
Recent turmoil in financial markets on global growth fears, led by weaker-than-expected data from China, has pushed investors out of emerging markets, however, and put a dent in analysts' expectations for Indian shares.
That sell-off in emerging markets was one of the reasons why the US central bank (Federal Reserve) kept rates unchanged last week.
But expectations the US central bank will raise rates this year and a lack of promised reforms from prime minister Narendra Modi's government has made foreign institutional investors to dump Indian shares.
"The policies (reforms) are holding out and the window for the government to act is getting narrower. It is clear that the world will not wait for India for too long," said Ambareesh Baliga, an independent market analyst.
A majority of analysts were of the view that key reforms such as a goods and services tax and land acquisition Bill would be passed, which should lift Indian shares over the coming year.
Modi, who took office in 2014 on promises of introducing reforms that were widely thought to be the missing leg of the Indian growth story, has so far failed to deliver. But 24 of 35 analysts expected the present government to pass those reforms.
Indian central bank governor Raghuram Rajan, who has cut interest rates four times this year to boost growth, said in an interview that India is in a better position to withstand a US central bank's rate increase compared to any other emerging economy.
Indeed, a majority of the analysts polled expect stock markets in China and Brazil to be the most vulnerable to such a move, which US central bank chief Janet Yellen has signalled is coming this year, but which many in financial markets still doubt.
Indications of relatively good economic growth compared to that of rival countries will make India more attractive to foreign and local investors, analysts said.
The economy grew seven per cent in the three months to June, similar to China. But recent data show China is slowing much more sharply than previously expected.
That should help Indian shares, but a lot would depend on the ability of the government to push through key reforms.