 "Rate-cut hopes boost markets")
Benchmark indices extended gains for a consecutive week, after encouraging domestic industrial growth and easing consumer price inflation rekindled hopes of a rate cut by the Reserve Bank of India (RBI), coupled with the US Federal Reserve’s decision to maintain status quo on interest rates.
The appreciation in the rupee against the dollar and firmer global cues also aided the sentiment of market players.
For the week ended September 18, the BSE Sensex reclaimed the 26,000-mark and finished at 26,218.91 levels, up by 608.70 points, or 2.38 per cent. The CNX Nifty rose 192.60 points, or 2.47 per cent, to settle at 7,981.90. The BSE Mid-cap Index surged 126 points or 1.20 per cent to close at 10,646 and the BSE Small-cap Index rose 105 points or 0.99 per cent to finish at 10,804.
On the currency front, the rupee showed strength on Friday rising 1.2 per cent against the dollar — its biggest daily gain since September 19, 2013. For the week, the rupee rose one per cent, breaking its two-week losing streak.
Market view
On market outlook, Hitesh Agrawal, head-research, Reliance Securities, said, “The US Fed postponed the interest rate lift-off citing the recent financial and economic market developments. Its commentary was also dovish indicating of a reduced probability of a US rate hike in calendar 2015. This is a sigh of relief in the interim for emerging markets like India.”
For the future, he added, “In the case of Indian equities, all eyes will now be on the next RBI Monetary Policy scheduled on September 29 with heightened hopes of a rate cut coming through this time around. Notably, US Fed’s status quo and sustained domestic dis-inflationary pressures provide a good opportunity to the RBI to provide support to India’s subdued economic growth with a rate cut.”
Key events
On the global landscape, curtains were drawn over the uncertainty surrounding the interest rates hike in the US when the Fed Reserve decided to keep the rates unchanged, at least for the time being. The US Fed Chair, however, hinted at a gradual hike later this year.
Back home, the consumer inflation data for the month of August remained gentle as it eased down to 3.66 per cent from 3.69 per cent in July 2015. The wholesale inflation contracted for the 10 consecutive months. It stood at -4.95 per cent for the month of August as against -4.05 per cent in July 2015.
India’s merchandise exports fell 20.66 per cent to $21.26 billion in August 2015 over August 2014.
The RBI governor on Friday, amid the chime for a rate-cut, sent out a strong message. Speaking at a CII event on Friday, he said, “We need the understanding and cooperation of the business community, not impatience and pressure for quick impossible fixes.”
Sectors & Stocks
Barring consumer durables, capital goods and auto indices, all sectors finished in the positive terrain. The BSE Bankex Index was the leader with five per cent gains for the week.
Maruti Suzuki soared two per cent after the RBI permitted foreign institutional investors to invest upto 40 per cent of paid-up capital of the company under the portfolio investment scheme.
Infosys finished with 1.29 per cent gains after the IT major announced that Australia’s Qantas Credit Union has selected Infosys Finacle to improve its customers’ digital experience, as part of their business transformation strategy.
Financial and banking pack welcomed Fed’s decision to maintain the short-term interest rates unchanged and also are anticipating an easing of monetary policy back home. From the pack, Axis Bank finished with highest gains of 7.48 per cent. Tata Motors skid nearly five per cent on persistent concerns over a slowdown in Chinese economy, which is affecting its sale of JLR-luxury arm of Tata Motors. Also, Tata Steel announced that it would sell its stake in Tata Motors, worth Rs 2,500 crore.
The week ahead
The markets might remain volatile ahead of the near-month September derivatives contracts expiry on Thursday, as traders roll-over positions to the October 2015 series. On the global front, China’s PMI index for the month of September will be released next week. Further, data on sales of existing homes and new homes for August in the US is scheduled for release next week.
