Nifty reclaims 8,350 on rate cut hopes; Rupee breaches 65-mark

Benchmark indices ended the session on a flat note amid volatility. Pharma shares gained amid a slide in the rupee and banking shares rallied on hopes of a rate-cut by the central bank on the back of easing consumer price inflation and growth in industrial production. However, the upside was capped as the monsoon session of Parliament came to an end without the passage of any key legislations.

The 30 share Sensex ended at 27,550 levels, up by 37 points while the 50-share Nifty ended at 8,356 levels, up by 6 points.

The broader markets, however, showed a divergent trend with BSE Midcap and Smallcap indices ending 0.2% and 0.8% lower respectively. The market breadth was negative, with 1,837 declines against 1,011 advances.

RUPEE

The slide in the rupee post the devaluation of yuan continued even in today’s trades. The rupee breached 65/dollar for the first time today since September 2013. The currency was quoting at 65.08, depreciating by 31 paise.

MARKET OUTLOOK

According to Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services, "The RBI will be under pressure to cut rates due to the better than expected CPI and IIP numbers, which is providing immediate relief to rate sensitive stocks like Banks and Auto. But due to the Yuan devaluation, the impact on export & import oriented sectors like Metals, Mining, Textiles and Chemicals is very high."

He further added, "The overall risk to the market is elevating as India is in head-on competition with China in sectors like Textile, Chemical and Metals. Additionally the loss of pace in implementing reforms is impacting India’s performance."

ECONOMIC UPDATE

The consumer inflation for the month of July eased out to 3.78%. The sharp decline in the CPI from 5.4% for the month of June has raised hopes of a rate-cut by the central bank. The industrial output accelerated to 3.8% in June from 2.7% in the previous month.

The monsoon session of Parliament was a complete washout and key legislations including the passage of the goods and services tax (GST) bill will now have to be passed in the winter session.

STOCKS IN FOCUS

Sectorally, BSE Healthcare and Bankex indices were among the gainers with gains of 0.7% each while BSE Metal index was the biggest loser with losses of 2.7%.

Banking shares saw renewed buying interest on the hopes of a rate-cut by the central bank post the easing of macro-economic data. Axis Bank, SBI, HDFC Bank gained between 1-1.5% each.

Pharma space also rallied on the hopes of gains in export revenues on the back of weakening rupee. Lupin, Cipla, Sun Pharma surged by 1.4-2.7% each on the Sensex.

Metal stocks continue to lose sheen post the devaluation of yuan.  Hindalco, Tata Steel, Vedanta slipped 5-10% each.

Coal India's consolidated net profit fell 6.66% to Rs 3764.35 crore on 4.93% fall in total income to Rs 20965.20 crore for FY16 Q1 year-on-year. However, the stock ended with 1.5% gains.

ONGC posted its Q1 results for FY16. The net profit increased by 14% to Rs. 5,460 crore. The revenues for the state run oil explorer was at Rs.22,825 crore, which was a rise of 4.5% year-on-year.  The stock ended flat with 0.2% gains.

Nestle India surged 3% after the Bombay High Court set aside the ban on Maggi noodles set by food regulator Food Safety and Standards Authority of India.

Among other shares, Tata Motors, Reliance Industries , Bharti Airtel and ITC dropped by 0.1-3.4% each on the Sensex.