Caution over US rates, weak rupee depresses markets (Roundup)

Mumbai, Jan 27 (IANS) Caution over chances of an interest rate hike in the US coupled with a weak rupee dented the Indian equity markets on Wednesday, leading a barometer index to close flat.

The barometer 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE) gained only six points or 0.03 percent during a volatile trade session.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) ended on a flat note. It inched up by just two points or 0.02 percent to 7,437.75 points, as volumes remained thin.

NSE’s India volatility index picked up by four percent, ahead of the derivatives expiry.

Initially, both the bellwether indices opened on a flat-to-positive note in sync with their Asian peers and firm closing of the domestic markets on Monday.

Moreover, short-coverings were supported by firm oil prices and expectations of healthy roll-over figures from the F&O (Futures and Options) expiry slated for Thursday.

However, caution over the upcoming rate-setting meeting of the US Fed capped gains. The US Fed’s FOMC (Federal Open Market Committee) meet is scheduled for January 27-28.

In contrast, gold prices edged higher and the US 10 year bond yield’s inched down, as investors expected the US Fed to maintain status quo. But, the expectations were not enough to raise markets higher.

Even, the weakness in rupee subdued sentiments. The rupee value closed above the 68-level against a US dollar. It weakened by 22 paise down at 68.05-06 to a US dollar from its previous close of 67.83-84 to a greenback.

The weakness in the rupee value indicates the massive outflow of foreign funds from the Indian equity and debt markets.

On Wednesday, the foreign institutional investors (FIIs) were net sellers. According to data with stock exchanges, FIIs divested Rs.366.93 crore. In contrast, the domestic institutional investors (DIIs) invested Rs.499.99 crore.

“Rupee closed weaker on spot, thanks to the strong demand for US dollars from local speculators. Offshore demand for Dollars was strong ahead of the FOMC tonight. We expect a range of 67-69 on spot over next few weeks,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

The S&P BSE Sensex, which opened at 24,643.13 points, closed at 24,492.39 points — up 6.44 points or 0.03 percent from the previous day’s close at 24,485.95 points.

The Sensex touched a high of 24,645.70 points and a low of 24,458.13 points during the intra-day trade.

In addition, the S&P BSE market breadth was flat, though it marginally favoured the bulls — with 1,349 advances and only 1,213 declines.

“Markets resigned to a flat close, as rupee weakened back to the 68 region and crude oil pulled back above $30 a barrel. With FOMC rate setting meeting scheduled for today and tomorrow, caution dominated equity markets across globe,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

Nitasha Shankar, vice president for research with YES Securities, cited that banking index gave up its morning gains led by minor profit booking in private sector banks, however; PSU banks maintained their strong uptrend throughout the day’s trade.

PSU banks were top gainers on hopes that the government might infuse Rs.70,000 crore to strengthen their books.

“Broader markets continued to outperform the headline indices. Pharma, PSU banks, media and energy indices ended with handsome gains,” Shankar noted.

Vaibhav Agarwal, vice president and research head at Angel Broking, predicted markets to remain flat with a negative bias, as any upside will be met with profit booking.

“We also expect selling pressure to sustain ahead of the F&O expiry,” Agarwal said.

Sector-wise, healthy buying was observed in stocks of healthcare, utilities and power. On the other hand, capital goods, consumer durables and banking sectors came under intense selling pressure.

The S&P BSE healthcare index augmented by 108.32 points, utilities index gained by 31.88 points and power index swelled by 28.58 points.

However, the S&P BSE capital goods index receded by 85.16 points, consumer durables index declined by 23.08 points and banking index dipped by 20.80 points.

Major Sensex gainers during Wednesday’s trade were NTPC, up 4.10 percent at Rs.143.40; Dr.Reddy’s Lab, up 2.38 percent at Rs.2,967.70, Sun Pharma, up 1.67 percent at Rs.821.30, Tata Steel, up 1.46 percent at Rs.257.55; and Tata Motors, up 1.28 percent at Rs.337.15.

Major Sensex losers during the day’s trade were BHEL, down 4.12 percent at Rs.139.60; Asian Paint, down 2.13 percent at Rs.858.70; Hindustan Unilever, down 1.78 percent at Rs.767.75; Hero MotoCorp, down 1.54 percent at Rs.2,482.05 and Adani Ports, down 1.37 percent at Rs.215.40.

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