 "Sensex reclaims 26,000; Nifty tops 7,900")
Benchmark shares indices recouped early losses to end higher on expectations that higher-than-expected rate cut by the Reserve Bank of India would boost growth.
The 30-share Sensex provisionally ended up 123 points at 25,739 and the 50-share Nifty gained 33 points at 7,829 .
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(Updated at 2:20PM)
Benchmark shares indices recouped early losses to trade near their day's highs shrugging off weak global cues on expectation that surprise rate cut by the Reserve Bank of India woudl fuel growth.
At 2:20PM, the 30-share Sensex was up 402 points at 26,019 and the 50-share Nifty was up 113 points at 7,909 .
In the broader market, the BSE MidCap index was up 0.4% and the BSE SmallCap index was up 0.1%. Market breadth was positive with 1,222 gainers and 1,153 losers on the BSE.
The Reserve Bank of India at its monetary policy review today reduced the repurchase, or repo, rate by a higher-than-expected 50 basis points to 6.75%. The street had expected a rate cut of 25 basis points. However, the central bank lowered its real GDP forecast for FY16 by 20 basis points to 7.4% compared with 7.6% earlier.
EXPERTS VIEWS ON RBI POLICY
"We believe there was substantial scope for interest rates to come down in India as a result of developments in commodities prices across the world. Hence, a 50 bps rate cut is a step in the right direction to improve the long-term growth of the economy. Going forward the key factors required for driving growth would be Goods and Services Tax (GST), resolution of Nonperforming loans (NPL) problems and ease of doing business. Over a period of time, we expect further moderation in interest rates from current levels and investors should continue to invest in duration with an aim to benefit from the same. On the equity side, as long as emerging market redemptions continue, Indian equities present a good investment opportunity; the fact that Foreign Institutional Investors (FIIs) are selling is a strong positive for investors to consider investing for the long term. " said S Naren , CIO, ICICI Prudential AMC.
“We at Kotak AMC had expected a 50 bps rate cut for the remainder quarter of the year. Yet, the alacrity and the swiftness of the policy response by RBI has positively surprised the market. The inflation pressure is declining and the long term inflation trajectory is on the downward slope as supply bottlenecks continue to open up. This creates an enabling environment for a more accommodative policy stance in future. Moreover, with global economy increasingly seeing India as a lucrative growth spot, it will be incumbent on the government and the central banker to work in tandem to further boost opportunities. We believe that equities with 2-3 year timeframe, and duration funds with 1 year plus timeframe are may provide competitive return for the investor.” said Lakshmi Iyer, Chief Investment Officer (Debt) & Head Products, Kotak Mutual Fund
"0.5% of repo rate cut by the RBI comes as a great pre Diwali bonanza to all Home buyers and hopefully should trigger positive sentiments for the Industry. The timing too is good as developers await the festival season for new launches. This could bring some relief and light to the industry. Specifically we do expect the affordable housing segment being impacted positively . This rate cut coupled with the interest subsidy scheme announced under the Pradhan Mantri Awas Yojna Mission Housing for all 2022, will see the affordability quotient further going up for the EWS and LIG consumer segments," said Deepak Joshi –President & Chief Business Officer- Religare’s Affordable Housing Loans business.
GLOBAL MARKETS
Asian equities ended lower on Tuesday with commodity stocks dropping the most amid sharp decline on Wall Street in overnight trades and sluggish economic data from China. Profit of Chinese industrial firms declined 8.8% in August compared to August 2014. China's Shanghai Composite ended down 2.1% while Hang Seng dropped 3% and Japan's Nikkei ended 4.2% lower.
European equities which opened lower trimmed losses and were trading mixed following a rebound in Glencore shares after the sharp plunge of 31% in the previous session on concerns that it has been unable to reduce its huge debt burden. The FTSE was down 0.4% while CAC-40 and DAX were trading with marginal gains.
SECTORS & STOCKS
Rate sensitive sectors were the top gainer led by Realty, Bankex and Auto indices. However, Metal index was the top loser while Healthcare, Oil and Gas were marginally down.
HDFC was the top Sensex gainer up 4.4% after Reserve Bank of India Governor, in its monetary policy statement today said it is proposed to reduce the risk weights applicable to lower value but well collateralised individual housing loans. At present, the minimum risk weight applicable on individual housing loans is 50%.
Among other housing finance companies, LIC Housing Finance, GIC Housing Finance were up 6% each.
In the banking pack, HDFC Bank, ICICI Bank, Axis Bank and SBI were up 1.5-2.4% each on hopes of pick up in credit growth on the back of lower interest rates.
Auto stocks gained on hopes that lower interest rates on auto loans would boost demand. Maruti Suzuki, Tata Motors and Bajaj Auto 1-4.2% each.
In the Realty space, HDIL, DB Realty, DLF, Unitech, Indiabulls Real Estate were up 3-10% each.
IT shares also pared early losses and were trading higher with Infosys and TCS up 1.4-2% each.
Other Sensex gainers include, ITC and Reliance Industries.
Metal shares continued to remain weak amid weak economic data from China also trimmed losses. Tata Steel, Vedanta and Hindalco were down 1.3-5% each.
Pharma shares also eased on profit taking after recent gains. Dr Reddy's Labs, Sun Pharma and Lupin were down 0.2-1.9% each.
Among other shares, Tree House Education and Accessories have dipped 9%. According to Business Standard report, proxy advisory Stakeholders’ Empowerment Services (SES) has raised concerns over high levels of trade receivables in the company's balance sheet.
