Indian share markets toast US interest rate status quo (Roundup)

Mumbai, Sep 18 (IANS) In sync with its Asian peers, a key Indian equities index closed on Friday at its highest level since Aug 31 as investors’ mood was calmed by the status quo in US interest rates that can momentarily arrest a possible shift of global funds away from emerging economies.

Analysts also saw the US move as a trigger for India’s central bank to lower interest rates.

The sensitive index (Sensex) of the Bombay Stock Exchange (BSE) opened on Friday at 26,130.36 points against Wednesday’s close at 25,963.97 points. The markets were closed on Thursday. It finally closed 26,218.91 points on Friday, with a gain of 254.94 points or 0.98 percent over the previous close.

In the interim, however, it was up over 500 points.

At the National Stock Exchange (NSE), the trend was similar. The broader 50-scrip Nifty, which had closed at 7,981.90 points, with a gain of 82.75 points or 1.05 percent.

The Sensex psychologically-important levels of 26,000 points, while the Nifty crossed the 8,000-point level intra-day. Rupee also ended up against the dollar.

Out of the 30 shares that go into the Sensex basket, 15 ended day’s trade in the green and 15 in red. Overall, out of 2,726 scrips that were trading on the Mumbai bourse, 1,687 of them advanced, 935 declined, while 104 remained unchanged.

Banking and realty stocks were in favour, as their sector-specific indices were up 2.66 percent and 3.16 percent, respectively. Nine out of 12 sectoral indices were trading in the green.

“The US Federal Reserve’s move is good and the expected move by the Reserve Bank of India (RBI) to cut rates by 25 basis points will induce positive mood in the market,” said the Kolkata-based investment analyst Janardan Kothari, referring to the monetary policy update due on Sep 29.

“But by December this year, I expect the Fed to increase interest rates by 25 basis points which can trigger market volatility across bourses globally. It is only a matter of time before the US federal reserve rates go up,” Kothari told IANS.

“Indian markets surged in today’s trade as hopes of a rate cut by the RBI were boosted by the Fed’s decision to keep interest rates unchanged. But the Fed chairman indicated that a rate hike is still likely this year,” added Shreyash Devalkar, fund manager for equities with BNP Paribas Mutual Fund.

According to Ajit Khandelwal, promoter of BNP Securities, the near-term projection for Indian shares is that they will trade in a narrow band, even as volatility will continue. “Now factors such as Bihar elections, GST bill and the corporate results will play pivotal roles,” he added.

Major Sensex gainers during Friday’s trade were: Axis Bank, up 4.70 percent at Rs.517.30, ONGC, up 3.49 percent at Rs.238.60, and Mahindra & Mahindra, up 3.09 percent at Rs.1,201.60. The losers were: Tata Motors, down 2.81 percent at Rs.328.40, Bajaj Auto, down 2.20 percent at Rs.2,294.15, and GAIL, down 1.73 percent at Rs.287.65.

Till late Thursday, there was some fear of a rate hike in the US, which could have potentially seen a flight of capital from emerging markets like India to the US. In fact, during August and September, foreign funds have been net sellers of Indian equities worth Rs.20,225 crore.

Even on Friday, these funds were net sellers worth Rs.214.02 crore.

Even as the global financial markets speculated over when the US central bank will end its zero-interest rate policy, the Fed Chair Janet Yellen instead opted for a status quo. While she said the US recovery was solid, concern was expressed over the global economic situation.

The reaction was mixed in the Asian markets. Japan’s Nikkei and Tokyo’s broader Topix were down nearly 2 percent.

China’s Shanghai Composite Index was fluctuating back and forth around the positive-negative territory initially. Later, it rallied by 0.40 percent. While Hong Kong’s Hang Seng was up 0.30 percent, Korea’s Kospi was higher by 0.98 percent.

In the US earlier, trading was marked by sharp volatility as blue-chip stocks fell, bond prices rose and the dollar posted its steepest single-day loss in a month against a basket of currencies, as the investor mood turned sour after the Fed’s rate status quo and concerns over global economy.

All major indices took a beating — 0.39 percent for Dow Jones industrial Average, 0.26 percent for S&P 500 and 0.1 percent for the Nasdaq Composite. The dollar index, measuring the greenback against six currencies, fell 1.1 percent.

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