Mumbai, July 18:
Hopes of a rate cut by the central bank, coupled with cheaper oil and stability in international markets, buoyed Indian equity markets during the trading days ended July 17, analysts said.
Even expectations of a somewhat positive first quarter results season, signals of a delay in the US rate hike by the Fed and a cut in transportation fuel prices cheered investor sentiments, they added.
The barometer index of the Indian equity markets, the 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) gained 801.90 points or 2.89 percent during the weekly trade ended July 17.
The index closed at 28,463.31 points in the week under review from the previous closing of 27,661.40 points on July 10.
The bullish movements comes a week after the barometer index had lost 431.39 points or 1.53 percent.
“The market’s are hopeful of a rate cut from the Reserve Bank of India (RBI) in its upcoming monetary policy review in August,” Anand James, co-head, technical research desk, Geojit BNP Paribas, told IANS.
According to James, data points such as the Index of Industrial Production (IIP), Consumer Price Index (CPI) and Wholesale Price Index (WPI) have come in line with estimates.
These data points, coupled with a good monsoon, have renewed hopes of an RBI rate cut in August.
On July 10, the IIP showed a slowdown to 2.7 percent for May – against 4.1 percent in April.
On July 13, official data on CPI showed a rise in India’s retail inflation to 5.40 percent in June, while the WPI continued in the negative territory in June, falling to (-)2.4 percent.
Another factor for the healthy performance during the week under review was the culmination of the Iran nuclear deal, analysts cited.
“The deal is important for India as it can now import more oil from Iran on cheaper rates and increase its exports of pharmaceutical and other products to that country,” James added.
Industry experts foresee oil prices to plunge — as and when Iran resumes to export oil at the pre-sanction levels. The Middle East state is believed to have around 25-30 million barrels of oil ready for exports.
After the deal was announced on July 14, both the Brent and the West Texas Intermediate’s (WTI) prices index corrected. The WTI had even fallen below $44 per barrel on Tuesday.
India is the world’s fourth largest oil consumer and also the second biggest buyer of Iranian oil after China.
Other major event in the week gone by was the passage of various austerity laws aimed at paving the way for a European Union (EU) backed bailout package.
Investor-anxiety over the US rate hike was also calmed after the initial comments made during the US Fed chairman’s testimony to the US Congress suggested a delay in the decision.
Even the stability in the Chinese markets also supported the investor sentiments here.
The continuous slide in the Chinese markets had eroded nearly 40 percent of the stock value and also caused panic.
More importantly, the inability of the Chinese government, fund houses and brokerage firms to arrest the fall led to global sell-offs.
Gaurav Jain, director with Hem Securities told IANS: “Markets closed the week on a strong note due to various factors like plummeting oil prices, European Union bailing out Greece. Greece parliament passing austerity measures.”
The cabinet’s approval for composite cap for foreign investments in a company also led to a rally in the later part of the week.
“The market is awaiting further clarification on the composite cap decision. The decision led to a rally in banking stocks,” Vaibhav Agarwal, vice president and research head, Angel Broking told IANS.
The move is expected to remove the distinction between FPI (Foreign Portfolio Investor), FDI and NRI (Non Resident Indian) investments.
The decision assumes significance as it can benefit companies, especially private banks which have separate caps for FII (Foreign Institutional Investor) within the total foreign investment limit.
The next major trigger cited Jain will be the monsoon session of parliament starting from July 21.
“There are high expectations on the passage of GST (goods and services tax) and land bills. The two bills are currently under preview of the parliamentary select committees,” Jain said.
Whereas, Agarwal cautioned that the markets might be subdued if the quarterly results plummet even below the current estimates of below average performance.
Lastly, the markets will also focus on the monsoons which have been 6 percent below normal so far this month, according to IMD (India Meteorological Department).
“The positive sentiment continued for Indian equities even as monsoons have lost pace in July. Going ahead, the markets would be driven by corporate earnings, monsoon progress and reforms in monsoon session,” said Sanjeev Zarbade, vice president, PCG Research, Kotak Securities. (IANS)