Hopes of a monetary policy easing, coupled with healthy roll-over from derivatives expiry and status quo in US interest rates, slightly buoyed the Indian equity markets during late-afternoon session on Thursday.
This led to a barometer index of the Indian equity markets to gain only 40 points during a volatile trade session.
The session saw the headline indices trade in a very narrow range, as gains made on the account of positive international sentiments were erased by caution over the sliding value of rupee and the upcoming Reserve Bank of India’s (RBI’s) monetary policy review.
Initially, both the bellwether indices opened on a flat note, ignoring positive cues from their Asian peers, firm crude oil prices and the US Fed’s decision to maintain status quo in interest rates.
However, the markets were able to move upwards on hopes that the RBI might opt for an interest rate cut given that the US Fed maintained its status quo on key lending rates, soothing investors nerves.
During its FOMC (Federal Open Market Committee) meet, the US Fed gave a bearish outlook on global markets and cautioned against future financial shocks.
The upward movement was slowed by low volumes and continous selling by foreign investors.
In addition, slide in rupee’s value unnerved investors. The rupee remained above the 68-level against the dollar during intra-day trade.
The weakness in the rupee value indicates the massive outflow of foreign funds from the Indian equity and debt markets.
On Wednesday, the foreign institutional investors (FIIs) were net sellers. According to data with stock exchanges, FIIs divested Rs.367 crore.
“Early session weakness in rupee was on account of importer’s dollar demand. Central bank intervention and some exporters selling has capped the advance in US dollar,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.
“Hopes of further policy easing from Bank of Japan tomorrow is also supporting risk sentiments in global markets.”
The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) was trading flat — higher by just 40 points, or 0.16 percent.
Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) was trading flat. It inched-up by 15 points, or 0.20 percent, at 7,452.70 points.
The S&P BSE Sensex, which opened at 24,481.86 points, was trading at 24,532.40 points (at 2.45 p.m.) – up 40.01 points or 0.16 percent from the previous day’s close at 24,492.39 points.
The Sensex has so far touched a high of 24,587.20 points and a low of 24,400.52 points during the intra-day trade.
The S&P BSE market breadth was flat, though it marginally favoured the bears — with 1,252 declines and 1,212 advances.
“Short-covering on account of hopes of a rate cut by RBI, US Fed’s decision to maintain lending rates and healthy roll-over from F&O expiry supported gains,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.
“However, gains were capped on account of rupee’s slide and US Fed’s caution on future financial shocks.”
Vaibhav Agarwal, vice president and research head at Angel Broking, elaborated that Asian markets remained flat as US Fed indicated towards a probability of a rate hike at its next meeting in March.
“We expect markets to continue to react to global cues in the absence of any major domestic trigger,” Agarwal noted.
“The street is also not factoring in any rate cut in the RBI policy next week. With the F&O expiry out of the way, markets will shift its focus towards expectations from the budget.”
The Sensex had closed the previous session on January 27, up by just 6.44 points, or 0.03 percent, while the Nifty inched up by two points or 0.02 percent.