Hopes of lending rates cut buoy equity markets (Roundup)

Mumbai, April 4 (IANS) Hopes of a rate cut in the monetary policy review, coupled with positive macro-economic data and value buying buoyed the Indian equity markets on Monday.

The Indian equity markets made healthy gains during the last hour of trade, as a rise in investor participation, along with increased foreign funds inflow lifted prices.

In the process, equity markets pared their initial losses, which occurred on the back of caution over a likely US rate hike and weak crude oil prices.

Consequently, both the key indices of the Indian equity markets closed the day’s trade in the green.

The barometer 30-scrip sensitive index (Sensex) of the BSE, which opened at 25,333.98 points, closed at 25,399.65 points — up 130.01 points or 0.51 percent from the previous day’s close at 25,269.64 points.

The Sensex touched a high of 25,424.15 points and a low of 25,223.49 points during the intra-day trade.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) also ended in the positive territory. It inched up by 46 points or 0.59 percent, to 7,758.80 points.

The BSE market breadth favoured the bulls — with 1,635 advances and 976 declines.

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 boosted by a positive close to the US markets on Friday.

However, the initial gains were soon ceded, as healthy US non-farm payrolls data released last week 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.

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

Besides, 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.

Nevertheless, key indices pared their initial losses, as hopes grew over a likely cut in key lending rates during Tuesday’s monetary policy review.

The Reserve Bank of India (RBI) will conduct its first bi-monthly monetary policy review for 2016-17 on April 5.

Investors expect the RBI to cut key lending rates on the back of the union budget’s fiscal prudence measures, reduction in small savings interest rates and low inflation.

In addition, healthy PMI (purchasing managers’ index) data, value buying and a stable rupee restored investors’ confidence.

The rupee made marginal gains during the day’s trade. It gained five paise at 66.20 to a US dollar from its previous close at 66.25 to a greenback (March 31).

“Increased chances of a rate cut during Tuesday’s monetary policy review and the better-than-expected PMI data cheered investors,” Anand James, chief market strategist, Geojit BNP Paribas Financial Services, told IANS.

“The last hour buying pared the initial losses which were caused due to heightened chances of a US rate hike, as well as the FOMC minutes scheduled to be release on Wednesday and weak crude oil prices.”

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

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

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

Nitasha Shankar, senior vice president for research with YES Securities informed that broader markets maintained their upward journey to terminate in the green.

“Midcap and smallcap indices ended with gains of 0.5 percent and 0.7 percent respectively,” Shankar noted.

“Reality, PSU banks and FMCG (fast moving consumer goods) indices ended in the red led by profit booking; while IT (information technology), auto, media and pharma indices saw fresh buying activity.”

Furthermore, foreign institutional investors (FIIs) were net buyers during the day’s trade, while the domestic institutional investors (DIIs) sold stocks.

The data with stock exchanges showed that FIIs invested Rs.236.82 crore, while the DIIs sold stocks worth Rs.333.74 crore.

Sector-wise, healthy buying was witnessed in IT, automobile and technology, entertainment and media (TECK) stocks, while the scrip of FMCG, realty and finance came under selling pressure.

The S&P BSE IT index increased by 220 points, followed by the automobile index, which gained by 208.14 points; and the TECK index rose by 124 points.

The S&P BSE FMCG index declined by 29.62 points, followed by the realty index, which was lower by 7.73 points; and the finance index slipped by 2.72 points.

Major Sensex gainers during Monday’s trade were Mahindra and Mahindra (M&M), up 4.29 percent at Rs.1,245.75; Bharti Airtel, up 3.76 percent at Rs.347.85, Infosys, up 3.12 percent at Rs.1,243.55; Tata Motors, up 2.24 percent at Rs.388.05; and Asian Paints, up 1.80 percent at Rs.885.60.

Major Sensex losers during the day’s trade were ITC, down 1.50 percent at Rs.330.95; Maruti Suzuki, down 1.13 percent at Rs.3,681.30; Axis Bank, down 0.99 percent at Rs.445.10; Coal India, down 0.83 percent at Rs.285.40; and HDFC, down 0.67 percent at Rs.1,104.15.

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