Stocks rally on interest rate cut hopes

Key benchmark indices logged strong gains led by ITC, ICICI Bank and HDFC. The barometer index, the S&P BSE Sensex, gained 232.56 points or 0.73% at 32,037.38, as per the provisional closing data. The Nifty index gained 75.60 points or 0.77% at 9,891.70, as per the provisional closing data. The Sensex provisionally settled above the psychological 32,000 mark after moving above and below that level during the day. The Sensex and the Nifty hit fresh record high in mid-afternoon trade. Data showing record low inflation data stoking hopes of an interest-rate cut bolstered sentiment.

Expectations of an interest rate cut by the Reserve Bank of India (RBI) next month have risen after latest data showed that retail inflation has eased to a record in June and factory output growth slowed sharply in May.

Key benchmark indices saw gap up opening on positive global cues, with the Sensex scaling past the 32,000 mark in early trade. Stocks traded with firmness between mid-morning and afternoon trade. Stocks extended gains in mid-afternoon trade.

The S&P BSE Mid-Cap index provisionally rose 0.46%. The S&P BSE Small-Cap index provisionally rose 0.42%. Both these indices underperformed the Sensex.

The market breadth, indicating the overall health of the market, turned negative from positive in late trade. On the BSE, 1,428 shares declined and 1,293 shares rose. A total of 164 shares were unchanged.

Index heavyweight and cigarette major ITC gained 3.22% to Rs 339.30. The stock hit a high of Rs 339.45 and low of Rs 331.55 in intraday trade.

Shares of Bharti Infratel fell 2.15%. Bharti Infratel is a provider of tower and related infrastructure and is a unit of Bharti Airtel.

Telecom stocks saw mixed trend. Tata Teleservices (Maharashtra) (down 0.26%), Reliance Communications (down 1.85%) and MTNL (down 3.13%) fell. Idea Cellular (up 2.28%) rose. Bharti Airtel advanced 1.84%. The stock turned ex-dividend today, 13 July 2017, for dividend of Re 1 per share for the year ended March 2017.

Goa Carbon rose 3.54% to Rs 377.75 at 14:35 IST on BSE after net profit spurted 591.56% to Rs 5.74 crore on 22.93% increase in revenue from operations to Rs 89.27 crore in Q1 June 2017 over Q1 June 2016. The result was announced during market hours today, 13 July 2017.

On the macro front, government data released after market hours yesterday, 12 July 2017 showed that retail inflation has eased to a record in June and factory output growth slowed sharply in May. Inflation as measured by the Consumer Price Index (CPI) slowed to 1.54% in June from 2.18% in May. The Index of Industrial Production (IIP) rose 1.7% in May compared with 3.1% in April.

Overseas, Asian and European shares rose as dovish comments from US Federal Reserve Chairwoman Janet Yellen improved risk-taking appetite.

China's exports grew for a fourth straight month in June, as external demand for goods from the world's second-largest economy continued to strengthen. Exports rose 11.3% in June from a year earlier, following growth of 8.7% in May. Imports in June rose 17.2% from a year earlier, compared with a 14.8% expansion in May. The trade surplus widened in June to $42.77 billion from $40.81 billion a month earlier.

US stocks closed higher yesterday, 12 July 2017 with the Dow industrials setting its first closing record in nearly a month as Federal Reserve Chairwoman Janet Yellen emphasized the central bank's gradual approach to normalizing monetary policy and expressed optimism about the economy in congressional testimony.

In her testimony on Capitol Hill, Yellen signaled that the Fed would take a cautious approach to tightening policy in the face of an uncertain inflation outlook. She said the Fed would continue to raise interest rates gradually, though it would change plans if inflation weakness persisted.

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