Led by softening in inflation and growing expectations of a rate cut in the forthcoming monetary policy review by the Reserve Bank of India on June 2, the 30-stock benchmark index — Sensex — at the Bombay Stock Exchange rose for the second consecutive day to close at a three-week high of 27,687 on Monday.
While Sensex rose 363 points or 1.3 per cent, the broader Nifty rose 111 points or 1.35 per cent to close at 8,373.7.
The rise in the Indian markets was the highest among all major markets and came even as the foreign institutional investors (FIIs) remained net sellers in the Indian equities. While they sold shares amounting to a net of Rs 202 crore on Monday, the support came from domestic institutions who invested a net of Rs 618.5 crore during the day.
In the absence of any adverse global news, the markets were driven mostly by domestic factors. While hopes of rate cut have grown after the retail and WPI inflation numbers softened in the month of April, projections of a timely monsoon also lifted the market sentiments.
“Amidst low FII participation in the month, markets have moved ahead on expectation for a rate cut on June 2. Global factors have to normalize since currency and FII inflow will be impacted. However, India’s valuation is not expensive to bring question of long-term trajectory,” said Vinod Nair, head of research, Geojit BNP Paribas Financial Services.
On Friday the oil companies announced a hike in prices of petrol and diesel by Rs 3.13 per litre and Rs 2.71 per litre respectively and the news lifted the shares of state owned oil marketing companies on Monday. The hike came on the back of Rs 3.96 per litre increase in petrol and Rs 2.37 a litre hike in diesel a fortnight back.
While the oil and gas index at BSE rose by 2.1 per cent, shares of HPCL and BPCL rose by 3.9 per cent and 3.3 per cent. Even shares of Indian Oil and GAIL rose 2.4 per cent and 3.5 per cent respectively. Reliance Industries too witnessed a 1.9 per cent rise in its share price.
The consumer durable index, however, rose the maximum and it was up 2.2 per cent.
The rupee fell back by six paise to 63.57 on Monday, after resuming strong in line with rally in local equities, against the greenback in late morning deals following dollar demand from importers.
Capital outflows, in small lots, also weighed on the rupee while rally in local stocks restricted the rupee fall to some extent, a forex dealer said.