Sensex edges up on hopes of rate cut

By Indulal PM

MUMBAI (Reuters) - The BSE Sensex and Nifty edged up on Wednesday, gaining for a fourth session in five, led by blue chips on continued hopes the central bank would follow other countries such as Japan and China in easing monetary policy to boost economic growth.

However, gains were capped, with indexes staying below record highs hit on Tuesday, as caution prevailed ahead of the expiry of monthly derivative contracts due on Thursday as well as the release of July-September economic growth data on Friday.

The Reserve Bank of India holds its policy review on Tuesday amid growing expectations it could cut interest rates after a sharp fall in consumer inflation.

 

Any rate cut would come amid growing expectations the European Central Bank will unveil more monetary stimulus, after the Bank of Japan last month stunned markets by expanding its massive stimulus spending.

"The sentiment is positive. The market is awaiting an 'investor friendly' policy from the central bank, which will help to continue the momentum," said Suresh Parmar, head, institutional equities at KJMC Capital Markets.

"However, volatility is likely to be higher in the next few sessions ahead of expiry and various data announcements."

The BSE Sensex gained 0.17 percent to 28,386.19, while the broader Nifty closed 0.15 percent higher at 8,475.75.

Blue chips led gains on expectation of stimulus measures. Mahindra and Mahindra rose 1.3 percent, while Hero MotoCorp closed 1.9 percent higher.

Other interest rate-sensitive stocks such as real estate companies also gained. DLF closed 7.2 percent higher, while Unitech advanced 4.4 percent.

ITC, which fell 5.2 percent in the previous session on the government's move to ban the sale of unpackaged cigarettes, gained 2.3 percent as analysts said the rule would have limited impact.

Financial Technologies rose 4.7 percent after it sold its stake in MCX-SX for 884.19 billion rupees (14.30 billion U.S. dollar) to well-known investor Rakesh Jhunjhunwala.

Infrastructure stocks rose after the central bank governor said India could give banks more flexibility to restructure distressed loans in a bid to steer funding towards cash-strapped infrastructure projects.

GMR Infrastructure gained 0.3 percent, while GVK Power and Industries closed 3.8 percent higher.

Among losers, Bajaj Auto closed down 1.1 percent and Bharti Airtel Ltd fell 2.5 percent after Nigeria's central bank devalued the naira by 8 percent and raised interest rates sharply on Tuesday.

(1 US dollar = 61.8525 rupees)

(Reporting by Indulal PM; Editing by Subhranshu Sahu)