Markets rebound after six-day fall

Poor IIP data reduce chances of 50 bps rise in policy rates.

Snapping a six-session losing streak, the domestic equity markets bounced back today on hopes that the the Reserve Bank of India (RBI) may not raise policy rates sharply in view of the poor Index for Industrial Production (IIP) data.

Market analysts pointed that the last few sessions were struck hard, as foreign investors pulled out funds from the emerging markets, including India, due to a number of negative developments.

The Bombay Stock Exchange (BSE) Sensitive Index, or Sensex, rose 1.76 per cent, or 337.76 points, to close the session at 19,534.10. Meanwhile, the CNX Nifty of the National Stock Exchange (NSE) climbed 1.9 per cent, or 109.15 points, to close at 5,863.25.

Foreign institutional investors (FIIs) continued to remain net sellers, but the quantum of selling was less compared with previous sessions. According to the provisional BSE data, FIIs sold shares worth Rs 371.50 crore. Whereas, domestic institutional investors (DIIs) continued to remain net buyers of shares worth Rs 359.21 crore today.

Ambareesh Baliga, vice-president, Karvy Stock Broking, said, “The IIP numbers declared today were not as bad as were expected earlier. There is a sense that RBI may not increase the interest rates by 50 basis points. There can be no rise, or may be an increase of 25 basis points in the policy rates.”

BSE’s Midcap index rose 1.68 per cent (121.97 points), while the Smallcap index was up 1.42 per cent (128.5 points).

On the sectoral front, all indices closed in the green, except capital goods that fell 0.18 per cent. Consumer durable index performed the best, rising 4.64 per cent, followed by realty (3.27 per cent), metal (2.8 per cent), banking (2.66 per cent) and auto (2.02 per cent).

Sources said markets had discounted a bit more since the beginning of this year due to rate rise fears. However, they added it would be too early to say whether coming sessions would see the same trend.

Mohan Natarajan, a director at Idhasoft Limited, a consulting firm, and former executive vice-president at Edelweiss Securities, said: “There has been short-covering in today’s market sessions, too. But, a couple of more sessions would have to be monitored to see whether there is a directional movement in the markets.”

He added despite a pullback rally today, other challenges persist, of which FIIs going out of Indian markets is one. “Moreover, ambience is still not good due to the recent scams and high inflation. These factors will hit the market,” said Natarajan.

Corporate earning growth expectation will also lend direction to the market movement, according to brokers.