Future US rate hike, sliding rupee subdue markets (Roundup)

Mumbai, Jan 28 (IANS) Caution over the upcoming domestic monetary policy review, coupled with continuous slide in rupee value and indications of a future rate hike in the US depressed the Indian equity markets on Thursday.

This led to a barometer index of the Indian equity markets to end the day’s trade on a flat-to-negative note during a volatile trade session.

The session saw the headline indices trade in a very narrow range, as gains made on account of positive international sentiments were erased by caution over the sliding value of rupee and the upcoming Reserve Bank of India’s (RBI’s) monetary policy review.

Initially, both the Indian bellwether indices opened on a flat note, ignoring positive cues from their Asian peers, firm crude oil prices and the US Fed’s decision to maintain status quo in interest rates.

Later on, markets started their upward climb on hopes that the RBI might opt for an interest rate cut given that the US Fed maintained its status quo on key lending rates.

However, the US Fed during its FOMC (Federal Open Market Committee) meet gave a bearish outlook on global markets and cautioned against future financial shocks.

The upward movement was eventually halted by continuous selling by foreign investors on fears of a future US rate hike in March.

In addition, slide in rupee’s value unnerved investors and dipped indices. The rupee closed above the 68-level against a US dollar. It weakened by 17 paise down at 68.23 to a US dollar from its previous close of 67.05-06 to a greenback.

“A late surge of demand for USD from option sellers on US dollars, looking to rebalance delta risk, triggered a sharp upmove towards 68:25 levels on spot by close of trading,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

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

The foreign institutional investors (FIIs) were net sellers during the day’s trade. According to data with stock exchanges, FIIs divested Rs.961.82 crore. In contrast, the domestic institutional investors (DIIs) invested Rs.394.22 crore.

The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) closed flat — lower by just 23 points, or 0.09 percent.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) ended the day’s trade flat. It inched down by 13.10 points, or 0.18 percent, at 7,424.65 points.

The S&P BSE Sensex, which opened at 24,481.86 points, closed at 24,469.57 points – down 22.82 points or 0.09 percent from the previous day’s close at 24,492.39 points.

The Sensex touched a high of 24,587.20 points and a low of 24,400.52 points during the intra-day trade.

The S&P BSE market breadth was flat, though it marginally favoured the bears — with 1,328 declines and 1,230 advances.

Likewise, Sensex closed the previous session on January 27 flat, up by just 6.44 points, or 0.03 percent, while the Nifty inched up by only two points or 0.02 percent.

“Short-covering on account of hopes of a rate cut by RBI, US Fed’s decision to maintain lending rates and healthy roll-over from F&O expiry supported gains,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

“However, gains were capped on account of rupee’s slide and US Fed’s caution on future financial shocks.”

Vaibhav Agarwal, vice president and research head at Angel Broking, elaborated that Asian markets remained flat as the US Fed indicated towards a probability of a rate hike at its next meeting in March.

“We expect markets to continue to react to global cues in the absence of any major domestic trigger,” pointed out Agarwal.

“The street (Dalal Street) is also not factoring in any rate cut in the RBI policy next week. With the F&O expiry out of the way, markets will shift its focus towards expectations from the budget.”

Nitasha Shankar, vice president for research with YES Securities, cited that volumes continued to remain thin leading to a range bound movement.

“Broader markets declined in line with the headline indices as minor profit booking dragged indices lower,” Shankar noted.

“Banking index ended in the red as PSU banks witnessed profit booking after recent outperformance. Pharma, media, FMCG and energy indices ended with handsome gains.”

Sector-wise, healthy buying was observed in stocks of fast moving consumer goods (FMCG), healthcare and oil and gas. On the other hand, capital goods, banking and consumer durables sectors came under intense selling pressure.

The S&P BSE FMCG index augmented by 108.63 points, healthcare index gained by 102.44 points and oil and gas index swelled by 79.66 points.

However, the S&P BSE capital goods index receded by 212.64 points, banking index declined by 160.57 points and consumer durables index dipped by 97.17 points.

Major Sensex gainers during Thursday’s trade were Hindustan Unilever, up 3.02 percent at Rs.790.90; Mahindra and Mahindra, up 2.06 percent at Rs.1,201.20; ITC, up 1.95 percent at Rs.318.60; Reliance Industries, up 1.76 percent at Rs.1,016.90; and Sun Pharma, up 1.62 percent at Rs.834.60.

Major Sensex losers during the day’s trade were Larsen and Toubro (L&T), down 2.72 percent at Rs.1,077.15; Bharti Airtel, down 2.22 percent at Rs.291.30; Axis Bank, down 2.06 percent at Rs.406.60; BHEL, down 1.97 percent at Rs.136.85; and Adani Ports, down 1.86 percent at Rs.211.40.

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