Lowered chances of a US rate hike buoys Indian equities

Mumbai, Oct 17 (IANS) Lowered chances of a US rate hike, coupled with buoyant global markets, propelled both the bellweather indices of the Indian equities to gain over half a percent in the just-concluded weekly trade.

Both the Indian bellwether indices made gains for the third straight week, ever since the country’s central bank eased key lending rates by 50 basis points on September 29.

“With Chinese markets holding the fort last week, most other global markets consolidated in a range. Indian markets saw metals and commodities surge which gave a positive uptick,” Sanjay Sachdev, chairman of ZyFin Holdings told IANS.

Furthermore, stable rupee value and soaring foreign investments in debt and equity markets supported bellwether indices’ upward trajectory.

However, profit-booking and disappointing quarterly results forced the markets to cede some of their gains.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), rose 135.09 points or 0.49 percent to 27,214.50 points from its previous weekly close at 27,079.51 points.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) too made gains during the weekly trade ended October 16. It gained 48.45 points or 0.59 percent to 8,238.15 points.

“Benchmark indices ended the week slightly higher, despite a weak start to the week. Markets closed in the red for three straight sessions led by weakness in tech stocks and negative global cues,” Vaibhav Agrawal, vice president, research, Angel Broking, told IANS.

“However, global cues turned positive led by a mixed set of data from the US reducing the probability of a US Fed rate hike this year.”

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE) lost 300 points between October 12-15.

Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS: “Weak US macro data that pushed the rate hike prospects further away has had a positive impact on investors sentiments here. Buoyant global markets and short covering allowed the major indices to make gains.”

The poor US retail sales data, coupled with lower than expected inflation, has increased the possibility of US Federal Reserve (US Fed) not raising interest rates this year.

Even the last month, the US jobs data released earlier is expected to deter the US Fed from raising rates.

The US Fed is slated to conduct its Federal Open Market Committee (FOMC) meet on October 27-28.

The FOMC assumes significance as higher interest rates in the US are expected to lead away FPIs (Foreign Portfolio Investors) from emerging markets such as India.

“Renewed buying interest by foreign portfolio investors restored the investor’s confidence and helped the market to bounce back after first three days of weakness,” Gaurav Jain, director with Hem Securities told IANS.

Since October 12-14, the FPIs invested around Rs.13,423.33 crore in government backed securities.

The data with the National Securities Depository Limited (NSDL), showed that the FPIs bought Rs.12,144.71 crore or $2.30 billion in equity and debt markets from October 12-16.

Nitasha Shankar, vice president of research with YES Securities, told IANS that overall volumes in the Indian equity markets remained on the lower side indicating lack of participation.

“High beta stocks witnessed renewed buying interest. Broader markets continued to outperform with maximum gains coming from media, metals, auto, banking and infrastructure stocks,” Shankar said.

Notwithstanding the ongoing rally, markets had to give up some of their gains on the back of profit-booking and caution over the upcoming quarterly results.

Global software major Infosys was the first bluechip to come out with its results on October 12. It dampened the markets with a weak guidance on revenue growth.

On Tuesday, Tata Consultancy Services (TCS) reported a mediocre increase in earnings, followed by a below-expected results from Hindustan Unilever.

“Tech stocks remained under pressure following weak results,” Shankar added.

The domestic macro data on the annual wholesale and retail inflation for September too disappointed investors, as both showed a trend towards higher food prices.

This led economists and analysts to predict that the Reserve Bank of India (RBI) will maintain a status quo in key lending rates for the rest of the calendar year.

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