Lessened chances of a US rate hike buoys equity markets 

Mumbai, March 30 (IANS) Short-covering ahead of derivatives expiry, coupled with lessened chances of a US rate hike and a recent economic reform buoyed the Indian equity markets on Wednesday.

Consequently, the barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) made healthy gains during the mid-afternoon trade session.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) traded in the positive territory. It edged higher by 121.30 points or 1.60 percent, at 7,718.30 points.

The Sensex, which opened at 25,062.06 points, traded at 25,274.38 points (2.00 p.m.) — up 373.92 points or 1.50 percent from the previous day’s close at 24,900.46 points.

During the intra-day trade, the Sensex touched a high of 25,283.91 points and a low of 25,055.42 points.

The BSE market breadth favoured the bulls — with 1,728 advances and 690 declines.

The barometer index had dipped by 66 points or 0.26 percent on Tuesday.

Initially, both the key indices of the Indian equity markets opened on a positive note, in-sync with their Asian peers, especially the Chinese indices and a firm close of the US exchanges on Tuesday.

Market observers cited that short-covering ahead of the derivatives expiry and increased chances of a rate cut by the Reserve Bank of India (RBI) supported prices.

Investors expect the RBI to cut key lending rates on the back of the union budget’s fiscal prudence measures, reduction in small savings interest rates and low inflation.

The RBI will conduct its first bi-monthly monetary policy review for 2016-17 on April 5.

In addition, Tuesday’s economic reform measure to allow 100 percent foreign capital in e-commerce with some riders cheered investors.

The move is expected to benefit not just foreign multi-brand retail entities like Amazon and e-Bay, but also single-brand overseas chains like Adidas, Ikea and Nike.

Besides, dovish comments from the US Federal Reserve chairman Janet Yellen on Tuesday, lessened chances of a US rate hike.

A hike in the US interest rates is expected to have led away Foreign Portfolio Investors (FPIs) from emerging markets such as India.

Further, an appreciating rupee boosted investors’ sentiments. The rupee opened the day’s trade at 66.49 to a US dollar from its previous close of 66.54 to a greenback.

“Dovish comments from US Fed chairman Janet Yellen has lessened chances of a US rate hike. This has acted as a positive cue for the equity markets,” Anand James, chief market strategist, Geojit BNP Paribas Financial Services, told IANS.

“Besides, short covering ahead of the derivatives expiry and increased chances of a rate cut by the RBI have supported prices and restored investors’ risk taking appetite.”

Vaibhav Agarwal, vice president and research head at Angel Broking, pointed out: “Bank Nifty is trading sharply higher after Vijay Mallya submitted a repayment plan of Rs.4,000 crore to the Supreme Court. Steel stocks are trading higher led by the extension of the safeguard duty.”

Agarwal expects the markets to shift focus towards the monetary policy and 4Q (fourth quarter) earnings expectations after the F&O (futures and options) expiry.

ADB lowers India’s next fiscal growth forecast to 7.4 percent

New Delhi, March 30 (IANS) With the global slowdown continuing to weigh on India’s exports, the Asian Development Bank (ADB) on Wednesday pegged downwards the country’s growth rate for the next fiscal to 7.4 percent, from 7.6 percent this year, saying further reforms will help India remain one of the fastest growing economies in the world.

“India’s economy will see a slight dip in growth in FY (fiscal year) 2016 (from April 1, 2016, to March 31, 2017). The economy will again accelerate in FY 2017 as the benefits of banking sector reforms and an expected pickup in private investment begin to flow,” ADB said in a release in Hong Kong.

ADB’s growth forecast of 7.4 percent for 2016-17 is lower than its earlier projection of 7.8 percent.

“In its latest Asian Development Outlook, ADB projects India’s gross domestic product (GDP) to grow 7.4 percent in FY2016, slightly below the FY2015 estimate of 7.6 percent. In FY2017 growth is forecast to rise 7.8 percent,” the statement added.

ADB said the weak global economy will continue to weigh on exports in the next fiscal, offsetting a further pickup in domestic consumption, partly due to an impending salary hike for government employees.

“India is one of the fastest growing large economies in the world and will likely remain so in the near term,” ADB’s chief economist Shang-Jin Wei said.

“The potential growth of the country can be raised further if it can successfully implement necessary reforms including unifying the tax regime, improving labour market regulations as opening further to foreign direct investment and trade,” Wei added.

The finance ministry’s Economic Survey 2015-16 tabled in parliament last month has pegged India’s growth for the next fiscal in the 7-7.75 percent range.

ADB also said that after two years of decline, consumer inflation is likely to rise, fuelled by the salary hike for government employees and a mild pick-up in global oil prices. Inflation is expected to average 5.4 percent in next fiscal, rising to 5.8 percent in 2017-18.

“The government is expected to maintain its ongoing fiscal consolidation efforts, with the deficit cut to 3.5 percent of GDP in FY2016, supported by tax revenue growth and asset sales,” the multilateral lender said.

ADB projected a recovery in India’s exports during the 2017-18 fiscal as large economies show a mild growth rebound, and an improved business environment in the country with government policy actions in place.

“However, India still faces significant challenges to finance the infrastructure it needs to deliver sustainable growth, with funding requirements estimated at around $200 billion a year through FY2017,” it said.

State-run banks’ non-performing assets (NPAs), or bad loans, and an over-leveraged corporate sector leave limited scope for more private investment in infrastructure and highlight the need for policy actions, the report added.

However, ADB also said that public investment would remain strong in the next fiscal and stronger public sector banks will help bring an increase in bank credit and boost private spending in the 2017-18 fiscal.

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