RBI Jacks Up Market Sentiments

At a time when everything around the globe seems to be gloomy and various threats right from global slowdown to expected interest rate increase by Federal Reserve are looming large over Indian bourses as well, the Indian equity markets got a much-needed booster shot in terms of better than expected 50 basis points repo rate cut by the RBI in its bimonthly monetary review on September 29. This has made the markets come out of their gloom at a time when indices across the globe were trading in red and India Inc. and the government were on the same side while asking for a “big” interest rate cut. This has really helped in boosting the confidence of investors in the Indian stock market.

On the whole, the BSE Sensex opened on a subdued note at 25,884 points on September 16 and since then remained range-bound between 26,471 points and 25,287 points during the fortnight. It reached its peak on September 18 but declined thereafter due to global and domestic cues. The best shot of the fortnight came on September 29 with a surprising rate cut by the RBI and the benchmark Sensex rose around 400 points intraday but declined afterwards due to global turmoil to close at 25,778 points, losing 105 points in the fortnight. In fact the Sensex saluted the RBI governor’s action with a gain of 161 points on September 29. In the same way, NSE Nifty opened at 7,886 points on September 16 and touched its lowest level of 7,691 points on September 29. At the start of the fortnight it gained momentum to touch the highest level of 8,055 points before closing at 7,843 points, losing just 43points during the fortnight.

On the other side, gloom was quite visible on the global platform as almost all the indices traded in red on the concern of global slowdown and anticipated Federal Reserve action regarding interest rate hike. During the last fortnight, US Dow lost 3.60 per cent due to anticipated Fed action before December this year. The biggest worry was that almost all the indices showed a decline during the fortnight with the biggest loser of the fortnight being Germany Dax with 7.82 per cent drop over the Volkswagen fiasco. It was followed by Brazil’s Bovespa, China’s Shanghai Composite, Japan’s Nikkei and UK’s FTSE with 7.19 per cent, 3.62 per cent, 3.25 per cent and 2.91 per cent respectively. The worst part was that not a single index showed appreciation. 

As far as the performance of FIIs/FPI is concerned, they once again, after so many months, showed a kind of rare confidence in the Indian stock market with net purchase of Rs 1,108 crore. On the other hand, Indian mutual funds remained net purchaser, cornering equity worth Rs 2,386 crore during the fortnight. As far as the individual gainers are concerned, IDBI Bank was the biggest gainer with 43 per cent jump followed by Rajesh Export, HDIL, Jaiprakash Associates and JP Hydro with 43, 21, 19 and 18 per cent rise respectively. On the other hand Priti Mercan was the biggest loser with 28 per cent decline followed by Sunrise Asia, MothersonSumi, Tata Motors and SKS Microfinance, which declined 25, 16, 15 and 14 per cent respectively.

Considering the present mood of the markets it seems likely that the booster dose of RBI would be neutralized by the Fed rate hike concern and Chinese economy slowdown and the markets may see some sort of sell-off in the coming days. The impact of a bad monsoon and the threat of rising inflation may trip markets in the medium term as US’ tapering could play spoilsport in the honeymoon of bourses as it will put pressure on the rupee. Considering this, it is advisable to pick selective stocks on the dips and regularly book profit in the current market.