Healthy monsoon, dovish Fed buoyed Indian markets

Mumbai, June 20 (IANS) A healthy monsoon, rise in crop prices, deferment of a US interest rate hike coupled with good macro economic data and parleys to resolve the Greece debt crises cheered the Indian equities markets in the week that just concluded.

The barometer index of the Indian equities market, the 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) gained 890.87 points or 3.37 percent during the weekly trade ended June 19.

The index closed at 17,316.17 points from the previous weekly closing of 26,425.30 points on June 12. The gain was attributed to the six day relief rally that started from June 12.

The index had ended the previous weekly trade (June 12) at 26,425.30 points — down by over 1.20 percent or 340 points. The week ended June 12 was the third straight week of losses for the barometer index.

“The dovish language used by the US Fed in the Federal Open Market Committee (FOMC) meet and the decision not to raise interest rates in June, cheered the market sentiments,” Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

“The relief that came from the FOMC and the attractive levels of the stocks after the steep decline, led to the rally,” Nevgi elaborated.

The US Fed’s stand that the rate hike might take place in the later part of the year gave a relief to the Indian markets. As higher interest rates in the US, could drive away FPIs (Foreign Portfolio Investors) from emerging markets such as India.

According to Nevgi, the sharp correction in the last couple of weeks led stocks recah closer to their long-term average return and became cheaper for entry.

This in turn gave a golden opportunity for domestic investors to pick-up stocks. The domestic institutional investors (DIIs) bought stocks worth Rs.4,557.94 crore during the week under review.

However, the data with the National Securities Depository Limited (NSDL), showed that the FPIs off-loaded stocks worth Rs.3,232.55 crore or $504.74 million.

In May, FPIs had sold stocks worth nearly $3 billion. They had picked-up scrip worth $2.4 billion in April.

Dipen Shah, head of private client group research with Kotak Securities, said that the good monsoon performance till now renewed hopes of average rainfall and a rise in rural incomes.

“The initial period of monsoon seems very healthy. The first two weeks of its progress in South and West has been good. This has renewed hopes of good rain falls this year, that can translate into better crop production and lower inflation based triggers,” Shah told IANS.

“The pessimism surrounding possibility of no more rate cuts by the reserves bank due to the prediction of a drought has been diluted. Stocks which depend on rural incomes will also perform well,” Shah added.

A good monsoon coupled with an increase in crop prices has also helped investor sentiments, cited Anand James, co-technical head for research with Geojit BNP Paribas.

“The increase in minimum support price (MSP) for rice and pulses has been noteworthy, as a measure to increase production acreage,” James told IANS.

The government has increased the MSP for rice by Rs.50 and Rs.275 for pulses.

One other reason for the calm in the markets was that the ongoing parleys to resolve the Greece debt crises has given hope for a resolution, market watchers said.

The parley have led to the soothing of nerves in US, European and Asian markets. The Greek debt payment to the IMF (International Monetary Fund) is scheduled for June 30.

“The Greek debt crises and the talks to resolve it was the biggest global factor which had an effect on us. The recent signs of some sort of movement in the talks has sent a positive signal in the international markets that has also buoyed our own exchanges,” Gaurav Jain, director of Hem Securities, told IANS.

On June 4, Greece had deferred a payment of 300 million euros that was due to be paid to the IMF.

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