Hopes of rate cut, positive global cues swell equity markets (Roundup)

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Mumbai, March 1 (IANS) Expectations of a rate cut, coupled with budgetary announcements and positive global cues, led the Indian equity markets on Tuesday to their steepest gains since September 2013.

Consequently, the barometer 30-scrip Sensitive Index (Sensex) of the Bombay Stock Exchange (BSE) closed the day’s trade up 777 points or 3.38 percent.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE), too, made healthy gains during the day’s trade. It ended higher by 235.25 points, or 3.37 percent, to 7,222.30 points.

The Nifty closed the day’s trade with the highest percentage gains since September 2013, when the pre-2014 general election rallies were first witnessed.

The Sensex, which opened at 23,153.32 points, closed at 23,779.35 points — up 777.35 points or 3.38 percent from its previous day’s close at 23,002 points.

During the intra-day trade, the Sensex touched a high of 23,821.49 points and a low of 23,133.18 points.

The BSE market breadth was heavily tilted in favour of bulls — with 2,011 advances and 601 declines.

Initially, both the key indices of the Indian equity markets opened on a positive note, in-sync with their Asian peers and expectations of a future rate cute.

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Short-coverings pushed prices higher. Investors expect the Union Budget’s fiscal prudence measures will provide the Reserve Bank of India (RBI) room to further ease monetary policy.

Presenting the Union Budget, Finance Minister Arun Jaitley on Monday announced that the government will adhere to a 3.9 percent fiscal deficit target. He also set a 3.5 percent target for the next fiscal.

Further, value-buying was witnessed at low levels. Buying in large caps like ITC and ICICI Bank lifted equity markets higher.

Even positive macro-data, that showed acceleration in India’s manufacturing activity in February supported the equity markets’ upward movement.

The monthly Nikkei’s Purchasing Managers Index (PMI) data reported a 51.1 uptrend in February. An index reading above 50 indicates an overall increase on the index.

Besides, investors’ confidence was restored after the central government announced capital expenditure on rural sector, infrastructure development, crop insurance, agricultural credit, skill enhancement and start-up initiative.

In addition, bullish crude oil prices led investors to chase stock prices higher. The WTI (West Texas Intermediate) prices rose by 1.2 percent to $34 per barrel.

Moreover, a strengthening rupee cheered investors sentiments. It strengthened by 44 paise at 67.86 to a US dollar from its previous close of 68.42 to a greenback.

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“Indian rupee cheered a constructive Union Budget, where government has struck a balance between fiscal consolidation and structural needs of the rural economy,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

“A sharp rally in bond prices have had a knock-on effect on rupee. Over the near term, hopes of a mid-policy rate cut from the central bank can continue to underpin Rupee. However, the zone between 67.50-70 can act a strong support level in the pair.”

According to Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, investors expect a RBI (Reserve Bank of India) rate cut as a result of the government’s commitment towards fiscal deficit targets.

“Hopes of macro stability after the Union Budget have restored the risk taking appetite of investors. Investors expect RBI to go in for a rate cut, due to government’s focus to stay on the fiscal deficit path,” James told IANS.

Vaibhav Agarwal, vice president and research head at Angel Broking, elaborated that markets traded sharply higher led by positive Asian cues.

“Markets traded sharply higher led by positive Asian cues after China decided to lower the reserve requirement ratio (RRR), injecting $100 billion of cash in the economy,” Agarwal noted.

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“We expect markets to consolidate at current levels before any strong move.”

At the end of the day’s trade the foreign institutional investors (FIIs) had invested Rs.2,912.59 crore, whereas the DIIs (domestic institutional investors) sold stocks worth Rs.834.59 crore.

Sector-wise, S&P BSE automobile index augmented by 664.63 points, banking index zoomed by 559.70 points, consumer durables index rocketed by 483.46 points, the S&P BSE capital goods index rose by 393.26 points, FMCG (Fast Moving Consumer Goods) index gained by 348.51 points, and IT (Information technology) index edged higher by 380.91 points.

Major Sensex gainers during Tuesday’s trade were ITC, up 9.91 percent at Rs.325.10; ICICI Bank, up 7.95 percent at Rs.205.10; Maruti Suzuki, up 7.80 percent at Rs.3,495.50; Hero MotoCorp, up 6.69 percent at Rs.2,667; and Adani Ports, up 5.30 percent at Rs.206.50.

Major Sensex losers during the day’s trade were ONGC, down 1.34 percent at Rs.191.50; Hindustan Unilever, down 0.58 percent at Rs.825 and Dr.Reddy’s Lab, down 0.11 percent at Rs.3,028.

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