The Reserve Bank of India's (RBI) indication after a policy review that interest rate cut may be announced if macroeconomic and financial developments favour rate cut and firmness in European stocks aided the upmove on the domestic bourses. At 13:17 IST, the barometer index, the S&P BSE Sensex, was up 270.38 points or 1.01% at 27,047.83. The Nifty 50 index was currently up 77.85 points or 0.95% at 8,278.90. The Sensex crossed the psychologically important 27,000 mark. Asian and European stocks edged higher after US Federal Reserve Chairwoman Janet Yellen said in a speech overnight that short-term interest rates wouldn't be raised until there was more clarity about the US economic outlook. The Sensex and the Nifty, both, hit their highest levels in more than seven months.
A delay in interest rate increases from the Fed would slow capital flight from emerging markets. Investors in emerging markets have been worried that higher interest rates in the US will drain liquidity from emerging markets and redirect it to developed economies.
The Sensex rose 287.98 points or 1.08% at the day's high of 27,065.43 in afternoon trade, its highest level since 29 October 2015. The index gained 52.08 points or 0.19% at the day's low of 26,829.53 at the onset of the trading session. The Nifty rose 90.20 points or 1.10% at the day's high of 8,291.25 in afternoon trade, its highest level since 26 October 2015. The index rose 15.35 points or 0.18% at the day's low of 8,216.40 in morning trade.
In overseas stock markets, Asian and European stocks edged higher after US Federal Reserve Chairwoman Janet Yellen said in a speech overnight that short-term interest rates wouldn't be raised until there was more clarity about the US economic outlook. Yellen's remarks followed monthly jobs report for May 2016 that raised concerns over the ability of the economy to absorb a rate hike as early as June. The Fed chief said last month's jobs report was "disappointing" and bears watching, though she gave a largely upbeat assessment of the US economic outlook, warning against attaching too much significance to the payrolls data in isolation. The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 14-15 June 2016. The Fed has kept the benchmark fed funds rate unchanged after raising it for the first time in nearly a decade in December 2015.
US stocks gained yesterday, 6 June 2016, even as Federal Reserve Chairwoman Janet Yellen said a rate-hike following an ugly jobs report late last week was still a possibility.
Closer home, the market breadth indicating the overall health of the market was strong. On BSE, 1,432 shares rose and 928 shares declined. A total of 139 shares were unchanged. The BSE Mid-Cap index was currently up 0.52%. The BSE Small-Cap index was currently up 0.88%. Both these indices underperformed the Sensex.
FMCG shares were in demand. Godrej Consumer Products (up 2.84%), Hindustan Unilever (up 1.87%), Nestle India (up 1.48%), Britannia Industries (up 1.23%), Jyothy Laboratories (up 1.22%), Bajaj Corp (up 1.15%), Dabur India (up 1.15%), Tata Global Beverages (up 0.88%), Marico (up 0.64%), Procter & Gamble Hygiene & Health Care (up 0.61%), Colgate Palmolive (India) (up 0.25%) and GlaxoSmithKline Consumer Healthcare (up 0.07%), edged higher.
Metal shares edged higher. Hindalco Industries (up 2.29%), Vedanta (up 2.07%), Tata Steel (up 1.55%), Bhushan Steel (up 1.43%), Hindustan Zinc (up 1.27%), Steel Authority of India (up 1.21%), NMDC (up 1.11%), JSW Steel (up 0.98%), National Aluminium Company (up 0.60%), Jindal Steel & Power (up 0.32%) and Hindustan Copper (up 0.21%), edged higher.
Meanwhile, copper price edged lower in the global commodities markets. High Grade Copper for July 2016 delivery was currently down 0.78% at $2.101 per pound on the COMEX.
The Reserve Bank of India (RBI) in its second bi-monthly monetary policy meeting today, 7 June 2016, kept its benchmark interest rate viz. the repo rate unchanged at 6.5%. The central bank also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL). The central bank said it continues to provide liquidity as required and will progressively lower the liquidity deficit in the banking system from 1% of NDTL to a position closer to neutrality.
RBI Governor Raghuram Rajan said in his monetary policy statement that the central bank will monitor macroeconomic and financial developments for scope for reduction in the repo rate. RBI has retained its March 2017 inflation projection of 7%. Rajan said that incoming data in the next few months will provide more clarity regarding RBI's March 2017 inflation target of 7%. The central bank has pointed out some upside risks to inflation such as firming international commodity prices, the implementation of the 7th Central Pay Commission awards, the upturn in inflation expectations of households and of corporates and the stickiness in inflation excluding food and fuel. Rajan said that the stance of monetary policy remains accommodative. The RBI has retained its gross value added growth projection for 2016-17 at 7.6%. It said that the risk to this number is evenly balanced.
Meanwhile, the monthly data released by Association of Mutual Funds In India (AMFI) showed that there was a net inflow Rs 4721 crore into equity mutual funds in May 2016. This was higher than inflow of Rs 4438 crore in April 2016. There was a net inflow of Rs 974 crore into balanced funds in May 2016, which was higher than inflow of Rs 366 crore in April 2016. Balanced funds invest the money in a combination of equity and debt, with majority of the investment going into equity. The funds' investments range from 65% to 80% in equity and the rest in debt.
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