Indian equity markets at new high, hoping for a rate cut by RBI

A plethora of events, such as hopes of a rate cut by the Reserve Bank of India (RBI), fresh inflows of foreign funds and the onset of the quarterly earnings season, pushed the Indian equity markets to a record high during the week ended Friday.

On July 13, the 30-scrip Sensitive Index (Sensex) of the BSE breached the 32,000 points-mark for the first time and registered a record high of 32,037.38 points on a closing basis. The wider Nifty of the National Stock Exchange (NSE) closed at a new high of 9,891.70 points.

Scaling more records, on July 14, the Nifty crossed the 9,900-mark for the first time to record an all-time intra-day high level of 9,913.30 points. On the same day, the Sensex touched a fresh high of 32,109.75 points during intra-day trade.

"Multiple factors were at play last week as benchmark indices tested new highs. Participants even ignored the worst outrage (technical glitch) witnessed on the NSE, which kept the biggest exchange of the country halted nearly for three hours on July 10," Vijay Singhania, Director of Trade Smart Online, told IANS.

On Friday, the Sensex surged by 660.12 points or 2.10 per cent to close the week's trade at 32,020.75 points, while the Nifty closed at 9,886.35 points -- up 220.55 points or 2.28 per cent.

During the week, domestic macroeconomic data points -- Consumer Price Index (CPI), Index of Industrial Production (IIP) and Wholesale Price Index (WPI) -- were released.

Data showed that India's annual retail inflation (CPI) eased to a record low of 1.54 per cent during June -- lowest since 1999 -- while the country's factory output growth (IIP) slowed to 1.7 per cent in May.

The country's annual rate of inflation based on wholesale prices (WPI), too, was dragged lower to record low levels of 0.90 per cent in June due to a massive contraction in food prices.

"India's retail inflation hit a record low in June creating more room for RBI to cut rates in the next monetary policy in August. With hopes of a rate cut, markets managed to hit Nifty 9,900 for the first time ever," said Dhruv Desai, Director and Chief Operating Officer of Tradebulls.

According to D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, the global stock market moved higher on signs that the US Federal Reserve will pursue a gradual rate tightening path, given persistently low inflation despite an improving economy.

"Also, hopes of a strong earnings season lifted the sentiments of the market participants. On the domestic market front, Nifty crossed the 9,900 milestones for the first time and the Sensex climbed yet another peak 32,110 on the back of foreign capital inflows and widespread buying by domestic investors," Aggarwal told IANS.

Provisional figures from the stock exchanges showed that foreign institutional investors (FIIs) purchased stocks worth Rs 1,259.98 crore, while domestic institutional investors (DIIs) bought scrip worth Rs 2,361.61 crore during July 10-14.

Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) invested in a total of equities worth Rs 366.44 crore, or $57.01 million, during the week ended July 14.

On the currency front, the Indian rupee strengthened by 14 paise to close at 64.45 against the US dollar from its last week's close.

Pointing out towards some other events that took place during the week, Desai said: "SEBI (Securities and Exchange Board of India) released a report that prohibits promissory notes from taking any unhedged derivative position exposure. It also clarified that 'hedging of equity shares' means taking a one-to-one position in the same stock."

The top weekly Sensex gainers were: Bharti Airtel (up 5.68 per cent at Rs 406.50), NTPC (up 4.97 per cent at Rs 167), Sun Pharma (up 4.31 per cent at Rs 573.40), Infosys (up 4.18 per cent at Rs 975.10) and State Bank of India (up 4.18 per cent at Rs 291.90).

The losers were: ONGC (down 0.63 per cent at Rs 158.65), Coal India (down 0.14 per cent at Rs 250.70), and Dr Reddy's Lab (down 0.10 per cent at Rs 2,702.50).