Rate easing and rupee buoy markets; Sensex up 343 points

Mumbai, Sep 30 (IANS) A day after a massive easing of key lending rates by the Reserve Bank of India (RBI), a barometer of the Indian equity markets rose 343 points or 1.33 percent during late-afternoon trade session on Wednesday.

The Indian equity markets continued their upward trajectory after the RBI on Tuesday cut key lending rates by 50 basis points. The markets were anticipating an easing of only 25 basis points.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange on Tuesday closed with gains of 161.82 points or 0.63 percent.

Analysts cited that more than expected monetary easing coupled with a dovish outlook by the country’s central bank, strengthening rupee value and stable Asian bourses supported the Indian markets.

Furthermore, the Supreme Court’s verdict in favour of Mauritius-based foreign fund Castleton Investment has shed more clarity over the applicability of minimum alternate tax (MAT) on foreign portfolio investors (FPIs).

The government on Wednesday told the Supreme Court that it will abide by its earlier circular — which proclaims that MAT levy will not be applicable to companies investing through the Double Tax Avoidance Agreement (DTAA) route, and for those which are not required to be registered under the Companies Act.

The government has already accepted the Justice A.P. Shah Committee’s report on MAT that says the levy should not be applicable on FPIs.

The rupee gained by 21 paise and was trading at 65.75 against a US dollar from its previous close of 65.96 against a greenback.

“The strengthening of rupee is in line with the trend of other major Asian currencies which have risen against the dollar,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

All the major Asian currencies appreciated by close to one percent against the US dollar.

“The quarter end dollar selling by the information technology (IT) companies and yesterday’s RBI announcement of giving greater access to foreign funds to invest in central and state government bonds also supported the trend,” Banerjee said.

The RBI’s decision on Tuesday is expected to usher in around $2.5 billion by this fiscal end.

On Wednesday, bullish sentiments were observed at the wider 50-scrip Nifty of the National Stock Exchange (NSE). It gained by 98.10 points or 1.25 percent at 7,941.40 points.

The S&P BSE Sensex which opened at 25,986.52 points, was trading at 26,121.25 points (at 3.00 p.m.) — 342.59 points or 1.33 percent up from the previous day’s close at 25,778.66 points.

The Sensex has so far touched a high of 26,127.63 points and a low of 25,918.21 points in the intra-day trade so far.

“The clarity on the MAT issues coming via the Supreme Court judgment has supported the markets. The verdict should smoothen the nerves of foreign investors and restore their confidence in the Indian markets,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

Vaibhav Agrawal, vice president, research, Angel Broking, told IANS: “The Indian market opened in the positive today, tracking Asian peers. The rupee too is trading strong, thus lending further support to the equity market.”

Sector-wise, healthcare, automobile, metals, capital goods and information technology (IT) witnessed healthy buying support. On the other hand, only banking index came under heavy selling pressure.

The S&P BSE healthcare index zoomed by 274.41 points, automobile index augmented by 212.53 points, metal index gained by 199.23 points, capital goods index increased by 189.04 points and IT index was higher by 187.44 points.

However, the S&P BSE banking index fell by 61.73 points.

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