Market shrugs off deficit gap, rallies fifth week in a row

Sustained foreign fund inflows amid positive global cues too supported the key benchmark indices to end in positive terrain for the fifth straight week.

Mumbai: Shrugging off the mayhem on the first day of the week following widening trade-deficit, drop in inflation propelled market sentiment on hopes that Reserve Bank will cut rates in forthcoming policy meeting next month, sending both indices to multi-months highs.

Sustained foreign fund inflows amid positive global cues too supported the key benchmark indices to end in positive terrain for the fifth straight week.

Interest rate sensitive stocks from realty and banking were at the forefront on expectations of rate cut by the RBI in its next monetary policy meeting on June 17 to improve the economic growth.

Besides rate related stocks, capital goods, power, pharma and refinery share too were in demand while FMCG, consumer durable, IT and tech counters were at the receiving end on profit-booking.

The Bombay Stock Exchange 30-share barometer resumed the week sharply lower with a fall of nearly 431 points, largest fall in the current calender year, and later rallied on positive economic data to a high of 20,328.19 before ending the week at 28-month high of 20,286.12, logging a rise of 163.80 points, or 0.81 percent.

The wide-based 50-issue CNX Nifty of the NSE also flared up by 80.05 points or 1.31 percent to nearly 30-month high of 6,187.30.

The onslaught of the first day was sidelined from the second-day of the week with recovery following sharp fall in Wholesale Price Index (WPI) to three-year low of 4.89 percent raising anticipation of interest rate cut by the Reserve Bank to stimulate economic growth.

Meanwhile, the data showed that the country's trade deficit widened in April 2013 following rise in imports while retail inflation (CPI) declined to 9.39 percent in April from 10.39 percent in March.

"Foreign fund flow has been strong as well. Investors are also betting on an aggressive reduction in interest rate following the April inflation numbers which came at sub 5% after a long period of time," said Sanjeev Zarbade, Vice President- Private Client Group Research, Kotak Securities.

Foreign Institutional Investors (FIIs) were consistent net buyers and infused Rs 4,746.53 crore in equities, including provisional data of May 17.

14 scrips out of the 30-share Sensex pack ended higher while other finished with losses.

ICICI Bank spurted by 5.16 percent, SBI by 5.14 percent, HDFC Bank by 2.31 percent, HDFC by 3.19 percent, L&T by 3.83 percent, BHEL by 2.83 percent, Cipla by 5.59 percent, Sun Pharma by 1.32 percent, Hindalco by 3.71 percent, M&M by 1.72 percent, RIL by 2.59 percent, ONGC by 3.54 percent and NTPC by 3.66 percent.

However, ITC dipped by 5.63 percent, Wipro by 2.94 percent, TCS by 1.32 percent, Infosys by 0.48 percent, Bajaj Auto by 1.59 percent, Coal India by 1.97 percent, GAIL India by 1.76 percent, Bharti Airtel by 2.90 percent, Hero MotoCorp by 1.43 percent, Maruti Suzuki by 1.31 percent, Tata Motors by 1.41 percent and Tata Steel by 2.14 percent.

Among sectoral indices, the S&P BSE-Realty rose by 5.93 percent followed by S&P BSE-CG 4.30 percent, S&P BSE Bankex 4.09 percent, S&P BSE-Power 3.88 percent, S&P BSE-HC 2.92 percent and S&P BSE-Oil&Gas 2.08 percent while S&P BSE-FMCG dropped by 2.93 percent, S&P BSE-CD by 2.12 percent, S&P BSE-IT by 1.82 percent and S&P BSE-Teck by 1.70 percent.

The total turnover at BSE and NSE during the week was at Rs 10,647.57 crore and Rs 55,133.94 crore from last week's turnover of Rs 11,489.92 crore and Rs 50,502.62 crore, respectively.

The Indian rupee depreciated by another eight paise to settle the week at 54.88 against the Greenback on sustained dollar demand from importers amid firm USD overseas, extending losses for the second straight week.

However, bullish local equities amid sustained capital inflows limited the rupee fall to a major extent.

At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced lower at 54.88 a dollar from last weekend's close of 54.80 and later dipped to a 2-month low of 55.0250.

But it recovered on strong equities to a high of 54.53 before settling the week at its opening level of 54.88, still showing a fall of eight paise or 0.14 percent. Last week, it had tumbled by 86 paise or 1.59 percent.

The Indian benchmark S&P BSE Sensex improved further by 163.80 points or 0.81 percent while FIIs injected Rs 4,746.53 crore in the last week, including provisional data of May 17.

Meanwhile, retail inflation (CPI) fell to 9.39 percent in April from 10.39 percent in March while headline inflation (WPI) dipped below 5 to 4.89 percent in April from 5.96 percent in the previous month, giving space for the RBI to cut the interest rate in the forthcoming monetary policy meeting next month.

Mr. Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said, "This week Rupee depreciated against the dollar despite firm Indian shares. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies traded positively this week which weighed on the Rupee and kept the Rupee movement range bound for the week. For Monday resistance for USDINR (Spot) pair is at 55.15 and the trading range for the same is expected to be within 54.70 to 55.20.

"Recommended to be cautious and buy USDINR (Futures) on dips with the appropriate stop loss as Rupee at this stage is expected to depreciate against strong dollar. Data showing easing wholesale inflation on Tuesday has sparked hopes the Reserve Bank of India may cut interest rates as early as next month, after already easing rates three times this year. Foreign investors have been net buyers for 21 consecutive sessions as of Thursday, bringing in a net of about USD 13 billion in 2013," he added.

The premium for the forward dollar dropped further on sustained receiving by exporters.

The benchmark six-month forward dollar premium payable in October ended lower at 157-1/2-159-1/2 paise as against the last weekend's level of 164-166 paise.

Far-forward contracts maturing in April also dipped at 319-1/2-321-1/2 paise as compared to 325-327 paise last weekend.

The RBI fixed the reference rate for the US dollar at 54.8865 and for euro at 70.5785 as against the last weekend's level of 54.5413 and for euro at 71.1075.

The rupee recovered smartly against the pound sterling to 83.68 from preceding weekend's level of 84.32 and also firmed up against euro to 70.65 from 71.14 previously.

However, the rupee remained firm against the Japanese yen to 53.56 per 100 yen from the last weekend's level of 53.89.