Sensex bounces back in late recovery as RBI rate cut hopes grow

Mumbai: Bouncing back at the fag end of a volatile trade, the Sensex on Monday broke its two-day falling spell by closing over 118 points at 26,349 as bets went up in anticipation of a rate cut at RBI policy review due on Wednesday. Shares of auto and metal sectors did much of the rescue job for the market benchmark. Also, the NSE Nifty rescaled the key 8,100 mark. The 30-share Sensex after shuttling between 26,390.80 and 26,125.35 while it settled 118.44 points or 0.45% higher at 26,349.10.

The gauge had lost 422 points in the previous two sessions on sustained foreign fund outflows amid weak global cues. The NSE Nifty ended up by 41.95 points, or 0.52%, at 8,128.75 after moving in a range of 8,141.90 to 8,056.85. Caution prevailed due to muted regional indices after Italian Prime Minister Matteo Renzi’s resignation in the wake of a heavy referendum defeat sparked worries about political instability in the euro zone and beyond.

But sentiment was buoyed after a monthly survey showed that the services sector, hit hard by cash shortage, contracted in November at the sharpest rate in three years, opening up room for RBI to lower rates at its policy meet on Wednesday, and a better trend in European shares shaking off its initial weakness. The Nikkei India Services Purchasing Managers’ Index (PMI), which tracks services sector companies on a monthly basis, stood at 46.7 in November, down from 54.5 in October.

Meanwhile, India’s economic growth rate is likely to fall to 6.5% in the ongoing quarter and remain subdued at around 7% in January-March as cash shortage is expected to last at least until the next month, Nomura, Japanese financial services major said in a report. Demonetisation of high-value notes last month is affecting the growth numbers and once the cash shortage eases, the country is expected to see a gradual recovery, it said.

Of the 30-share Sensex, 20 led by Asian Paints, M&M, Lupin, Bharti Airtel, Maruti Suzuki, Bajaj Auto and ITC, ended higher, gaining by up to 3.58%. Among bank stocks, SBI, HDFC Bank, ICICI Bank and Axis Bank ended 0.90% higher as participants created fresh positions ahead of the RBI policy review. Shares of IT exporters, however, traded with a negative bias as the rupee strengthened against the dollar after falling to an all-time low of 68.86 last month.

TCS, Wipro and Infosys all fell by up to 1.68%. On the sectoral front, BSE auto index rose by 1.92%, metal 1.52%, FMCG 1.36%, consumer durables 1.12% and bankex 0.81%.

Broader markets too showed a better trend, with the mid-cap index rising by 0.66% and small-cap 0.26% as investors made fresh purchases. Foreign portfolio investors (FPIs) sold shares worth a net Rs190.52 crore last Friday, showed provisional data. Overseas, key indices in Japan, Shanghai and Hong Kong dropped by up to 1.21%. In Europe, Frankfurt’s DAX surged 1.73% and Paris CAC 1.34% while London’s FTSE was up 0.72% in their late morning trade.