Hopes of Eurozone, Chinese stimulus strengthens Indian equities (Weekly Review)

Mumbai, Oct 24 (IANS) A Eurozone stimulus package and lowered chances of a US rate hike, coupled with healthy quarterly results from India Inc., propelled the key bellwether indices of Indian equities to gain over 0.60 percent in the just-concluded weekly trade.

Both the Indian bellwether indices made gains for the fourth straight week, ever since the country’s central bank eased key lending rates by 50 basis points on September 29.

Besides hopes of more Eurozone stimulus, the rally was supported by better-than-expected quarterly results, a stable rupee value and buoyant global markets.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), rose 256.31 points or 0.93 percent to 27,470.81 points from its previous weekly close at 27,214.50 points.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) too made gains during the weekly trade ended October 23. It gained 57.3 points or 0.69 percent to 8,295.45 points.

“Markets ended the week in the positive for the fourth consecutive week after gains in the last trading session on account of the European Central Bank (ECB) stimulus measures,” Vaibhav Agrawal, vice president, research, Angel Broking, told IANS.

“However, lack lustre trading was witnessed throughout the week in the absence of any major domestic triggers.”

The market’s weekly gains came on the back of hopes of ECB extending its bond buying programme and China increasing its stimulus measures.

The investors’ confidence was restored as the ECB did not hike interest rates during its monetary policy meet on Thursday. ECB President Mario Draghi said that rate cuts are being considered to stimulate the eurozone economy.

After the ECB meet, equity market participants here have gathered that the US Federal Reserve will refrain from raising interest rates during its monetary policy meet next week.

The US Fed will decide whether to raise rates during its Federal Open Market Committee (FOMC) meet on October 27-28.

The FOMC assumes significance as higher interest rates in the US are expected to lead away FPIs (Foreign Portfolio Investors) from emerging markets such as India.

Dipen Shah, head of private client group research, Kotak Securities credited the equity market gains and bullish outlook on increased government spending.

“We believe that the recent rate cuts and various administrative, executive decisions by the government should lead to higher investments by the private sector,” Shah said.

“Improvement in private sector capex (capital expenditure) will likely result in better earnings growth and valuations for the relevant sectors.”

Gaurav Jain, director with Hem Securities told IANS, that better-than-expected quarterly results from bluechips lifted investors’ sentiments.

“Indices climb was supported by strong set of key corporate earnings like index heavyweight Reliance Industries and HDFC Bank,” Jain said.

Reliance Industries reported a record consolidated net profit of Rs.12,942 crore ($2 billion) for the six-month period ended September 30, which is an 8.5 percent jump over last year. For the second quarter, the profit was up 12.5 percent.

HDFC Bank closed the second quarter of the current fiscal with around 20 percent growth in net profit.

The bank posted a net profit of Rs.2,869.45 crore for the period ended September 30, 2015, up from Rs.2,381.46 crore posted the previous year.

Notwithstanding, the stellar performance by some bluechips, market observers cited that investors were seen cautious to chase prices in the quarterly results season.

“Investors were cautious to chase prices higher due to the results season. Unlike the last two quarterly results season, when the markets approached with an optimistic stance, this time around there was caution and anxiety,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

“Not just caution, major companies like Infosys and RIL which were trend setters in earlier results seasons failed to leave a long lasting mark.”

Pankaj Sharma, equities head with Equirus Securities pointed out that increased foreign funds inflow boosted the Indian equity markets.

The data with the stock exchanges showed that the foreign institutional investors (FIIs) were net buyers in the weekly trade, while domestic institutional investors (DIIs) were net sellers.

According to the data with stock exchanges, the FIIs picked up stocks worth Rs.1,602.77 crore, while the DIIs sold stocks worth Rs.895.84 crore.

The Indian rupee ended the just concluded weekly trade higher by 30 paise at 64.83 to a US dollar on Friday from its previous close of 65.13 to a greenback.

The rupee had closed at 64.82 to a US dollar during the week ended October 16.

Nitasha Shankar, vice president, research, with YES Securities, told IANS: “Smallcap and midcap indices witnessed marginal gains in line with the benchmark Index.

“Information technology (IT), FMCG (Fast Moving Consumer Goods ), energy and media stocks witnessed good buying for the week, while, metal and infra stocks saw selling pressure,” she added.

(Rohit Vaid can be contacted at rohit.v@ians.in)

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