Caution over monetary policy review dents markets

Mumbai, Feb 1 (IANS) Caution over the upcoming monetary policy review, coupled with negative global indices and a weak rupee dented the Indian equity markets on Monday.

This led to a barometer index of the Indian equity markets to close the day’s trade on a flat-to-negative note — down 46 points.

Initially, both the bellwether indices of the Indian equity markets opened on a positive note, following their steep rise on last Friday.

However, sentiments were soon subdued due to negative Asian markets, and selling pressure in the banking and the automobile sectors.

Investors were also seen to be cautious ahead of the Reserve Bank of India’s (RBI) upcoming monetary policy review.

The RBI is expected to conduct its sixth and the fiscal’s final bi-monthly monetary policy review on February 2.

Besides, a weak rupee unnerved investors. It weakened by six paise to close at 67.84 to a US dollar from its previous close of 67.78 to a greenback.

“Rupee yo-yoed against the US dollar, thanks to the see-saw moves in domestic bond and equity markets. The BoJ’s (Bank of Japan) lead risk-on failed to carry markets through today, as risk of competitive devaluations from other Asian countries, like China, has increased,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

“Rupee too weakened from the day’s high of 67.64 to 67.84 levels on spot. Demand for US dollars from importers at lower levels supported the pair.”

Even the flat-to-negative European indices disappointed the Indian equity markets.

In addition, investors seem to have ignored positives such as a rising PMI (Purchasing Managers index) for January and firm crude oil prices which stood around $33 to a barrel of 159 litres.

The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) closed lower by 46 points, or 0.18 percent.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) ended the day’s trade flat. It inched down by eight points, or 0.10 percent, at 7,555.95 points.

On the bright side, Nifty touched an intra-day high of 7,600 points — first time since January 14.

The S&P BSE Sensex, which opened at 24,982.22 points, closed at 24,824.83 points — down 45.86 points or 0.18 percent from the previous day’s close at 24,870.69 points.

It touched a high of 25,002.32 points and a low of 24,788.58 points during the intra-day trade.

The S&P BSE market breadth ended flat, though it marginally favoured the bulls — with 1,423 advances and 1,278 declines.

“Caution over RBI’s monetary policy review and a weak rupee subdued investors’ risk-taking appetite. Negative Asian markets and flat-to-negative European indices, too, dented sentiments,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

Vaibhav Agarwal, vice president and research head at Angel Broking, elaborated that markets ended in the red after trading in the positive territory for most part of the day.

“We expect RBI to maintain status quo in tomorrow’s bi-monthly monetary policy. Although CPI (Consumer Price Index) has inched up, it remains within the RBI targets,” pointed out Agarwal.

“Also, despite a weak IIP (Index of Industrial Production) data, we believe the RBI would follow a wait and watch approach and seek more clarity from the upcoming union budget, before taking a call.”

Nitasha Shankar, vice president for research with YES Securities, cited that Indian markets ended trade marginally in the red amidst thin volumes indicating a pause before it resumes a pullback rally.

“Moreover, equity markets globally are witnessing profit booking post recent rise leading to this weakness in our markets. Broader markets, however, ended in the green outperforming the headline indices as high beta stocks witnessed buying interest,” Shankar noted.

“Banking index continued to be a major drag in trade as PSU (public sector undertaking) banks witnessed fresh round of selling dragging the PSU index down 3.5 percent.”

According to Shankar, metal, FMCG (fast moving consumer goods) and IT (information technology) indices ended in the green, while bank, auto, energy, media and pharma indices ended in red.

The S&P BSE capital goods index augmented by 120.60 points, FMCG index gained 72.58 points and IT index swelled by 63.59 points.

However, the S&P BSE banking index plunged by 246.93 points, automobile index receded by 60.95 points and finance index depleted by 26.33 points.

The domestic institutional investors (DIIs) turned net sellers, while foreign institutional investors’ (FIIs) were net buyers during the day’s trade.

The data with stock exchanges showed that DIIs divested Rs.535.70 crore, while the FIIs’ picked up stocks worth Rs.253.88 crore.

Major Sensex gainers during Monday’s trade were Adani Ports, up 3.67 percent at Rs.220.50; Coal India, up 2.67 percent at Rs.328.60; Bharti Airtel, up 2.35 percent at Rs.296.50; Asian Paints, up 2.12 percent at Rs.887.25; and Cipla, up 2.07 percent at Rs.597.80.

Major Sensex losers during the day’s trade were ICICI Bank, down 5.63 percent at Rs.217.15; State Bank of India (SBI), down 3.92 percent at Rs.172.90; Maruti Suzuki, down 3.68 percent at Rs.3,946.80; Axis Bank, down 2.17 percent at Rs.399.30; and Hindustan Unilever, down 1.96 percent at Rs.800.90.

Leave a Reply