Sensex soars past 32,000 level on rate cut hopes

Low inflation brightens chances of a rate cut by the RBI

By: ENS Economic Bureau | Mumbai | Published:July 14, 2017 2:07 am
sensex, stock market, nse, bse, gst, gst rollout, nifty, business news, indian express, indian express news The Sensex settled at a new peak of 32,037.38, up 232.56 points, or 0.73 per cent.

The BSE Sensex on Thursday soared 232 points to hit the 32,000-mark for the first time and the NSE Nifty Index closed at a new peak 9,892 as inflation fell to a record low, raising the possibility of a rate cut by the Reserve Bank of India in August.

The Sensex settled at a new peak of 32,037.38, up 232.56 points, or 0.73 per cent. It surpassed its previous record of 31,804.82 touched on Wednesday. The index had gained 676.75 points in the past four sessions. The broader 50-issue NSE Nifty spurted 75.60 points, or 0.77 per cent, to close at fresh lifetime high of 9,891.70, bettering its earlier record 9,816.10 hit yesterday.

It took 33 sessions for the Sensex to rise 1,000 points before it finally went beyond the psychologically significant 32,000 on Thursday. The Sensex and the Nifty have surged more than 20 per cent so far this year, the best among Asian rivals, boosted by a more than $14 billion of purchases by foreign and domestic funds, according to the latest data compiled by Bloomberg.

Vinod Nair, head of research, Geojit Financial Services, said, said, “The market is moving forward with strong footing as inflation softened further to 1.5 per cent in June which may give room for a rate cut by the RBI. On the other hand, US Fed’s view on gradual pace in interest rate hikes has spurred the market and the rupee.” Higher Asian and European stocks provided fodder after the US Fed chief, in a House testimony, signalled that the approach to higher rates will be steady, prompting investors here to buy more.

Retail inflation for June hit a historically low 1.54 per cent and industrial output growth for May slumped to 1.7 per cent, boosting chances of a rate reduction by the Reserve Bank at its upcoming August policy meet.

According to Deepak Jasani, head – Retail Research, HDFC Securities, the Sensex touched the psychological 32000 mark, aided by expectations of a rate cut, good monsoon and overcoming the fears of disruption due to introduction of GST. “The last 1,000 point rally in the Sensex was driven by Reliance, large pharma stocks, Bharti Airtel, ITC and Maruti. Unlike in the past, banks and IT stocks did not contribute meaningfully to the latest rise. Local fund and non-fund inflows contributed to this rise,” Jasani said.

The rise in the markets has been aided by the risk-on sentiments prevailing across the globe.

“Valuations look stretched going by historical parameters … however, some more upside is possible in the coming few weeks. Retail investors may use this rise to reweight their broad asset allocation, relook at the stocks that they own and clean/shrink their bulging portfolios of stocks …,” he said.

On Thursday, ITC emerged as the top gainer by rising 3.03 per cent. Bharti Airtel, ICICI Bank and Sun Pharma rose up to 1.84 per cent. TCS, the largest IT exporter, firmed up 0.20 per cent ahead of its June quarterly earnings.

Traders said ample liquidity in the market is driving the current phase of the rally amid optimism over earnings from blue-chip companies. Mutual funds, which were witnessing huge inflows, were big investors in the market. Consumer goods and banking stocks had a good day. The FMCG index rose the most by surging 1.58 per cent, followed by capital goods and banking.

 

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