Caution over monetary policy review dent markets

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Mumbai, April 4 (IANS) Caution ahead of the monetary policy review, along with fears of a likely US rate hike, subdued the Indian equity markets on Monday.

Consequently, both the key indices of the Indian equity markets traded flat during a choppy mid-afternoon trade session.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) rose merely 17 points or 0.21 percent, at 7,729.60 points.

The barometer 30-scrip sensitive index (Sensex) of the BSE, which opened at 25,333.98 points, traded at 25,293.13 points (2.00 p.m.)- up 23.49 points or 0.09 percent from the previous day’s close at 25,269.64 points.

The Sensex touched a high of 25,419.19 points and a low of 25,223.49 points during the intra-day trade.

In contrast, the BSE market breadth favoured the bulls — with 1,430 advances and 995 declines.

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The barometer index had closed in the negative territory on Friday, the last trade session. It had declined by 72.22 points or 0.28 percent.

Initially on Monday, both the key indices of the Indian equity markets opened on a positive note. Investors’ sentiments were buoyed by a positive close to the US markets on Friday, following healthy non-farm payrolls data.

However, the initial gains were not sustained, as caution grew over the Reserve Bank of India’s (RBI) monetary policy review slated for Tuesday.

In addition, weak crude oil prices due to supply side issues dented sentiments.

Besides, healthy US non-farm payrolls data heightened the chances of a US rate hike.

A hike in the US interest rates is expected to lead away Foreign Portfolio Investors (FPIs) from emerging markets such as India.

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The FOMC (Federal open market committee) minutes expected to be released on Wednesday and the start of the fourth quarter (Q4) results season deterred investors from chasing prices.

The rupee, too, remained flat. It opened at 66.30 to a US dollar from its previous close at 66.25 to a greenback (March 31).

Nevertheless, key indices tried to pare their losses on the back of healthy PMI (purchasing managers index) data and an increase in foreign funds inflow.

“Caution ahead of the key global and domestic events such as monetary policy review on Tuesday and the FOMC minutes scheduled to be release on Wednesday dented sentiments,” Anand James, chief market strategist, Geojit BNP Paribas Financial Services, told IANS.

“Weak crude oil prices, too, dampened sentiments.”

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Vaibhav Agarwal, vice president and research head at Angel Broking, pointed out that markets seemed to have already factored in a 25 basis points cut in the RBI’s monetary policy on Tuesday.

“With the earnings season set to begin, that should remain a key trigger for the markets,” Agarwal told IANS.

“Global flows would continue to be dictated by the expectations of US interest rate hikes.”

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