Markets continue to rule firm for 4th week; Sensex up 531 points

Despite last day selling due to RBI's repo rate hike, Sensex continued to rule firm for the 4th consecutive week by surging 531 points.

Mumbai: Despite last day selling due to RBI's repo rate hike, the S&P BSE benchmark Sensex continued to rule firm for the 4th consecutive week by surging 531 points to finish the week at 20,263.71 on good buying support after the US Federal Reserve decided to maintain its stimulus.

The Sensex resumed higher at 19,977.38 after SEBI eased investment norms for overseas entities in government debt, but weighed down as inflation soared to a six-month high and closed nearly flat on Monday.

Inflation, as measured by the wholesale price index, came in at 6.1 percent in August compared with 5.79 percent in July, the highest level since February.

The Sensex rallied to almost 3-year high to 20,739.69 on Thursday after the US Federal Reserve unexpectedly left its stimulus programme unchanged, easing fears of capital outflows. The decision may attract investments in most emerging markets, including India, this year.

However, the Sensex fell on profit-booking from operators on the last day of the week to end sharply higher by 530.95 points or 2.69 percent at 20,263.71 from 19,732.76 last weekend after RBI Governor Raghuram Rajan on Friday unexpectedly raised a key interest rate to combat inflation and partially rolled back liquidity tightening measures.

The RBI raised the short-term policy repo rate to 7.5 percent from 7.25 percent, saying inflation had to be lowered to more tolerable levels. The move may increase interest rates on home and auto loans.

To ease liquidity, the marginal standing facility rate, at which banks borrow from the RBI, was cut to 9.5 percent from 10.25 percent and the minimum daily maintenance of the cash reserve ratio was lowered to 95 percent.

The Sensex has gained by 1,744.27 points of 9.42 percent during the four weeks.

The NSE 50-share Nifty also rose by 161.50 points or 2.76 percent to 6,012.10 from last weekend's close of 5,850.60. It has also gained by 540.35 points or 9.88 percent in the four weeks.

Foreign Institutional Investors continued their buying spree by investing net Rs 5,694.96 crs during week including the provisional figure of September 20.

23 scrips out of the 30-share Sensex pack ended in green while remaining seven finished in red.

Major gainers from the Sensex pack were Maruti Suzuki (11.01 pct), Gail India (8.70 pct), Jindal Steel (8.05 cpt), ITC (7.19 pct), Bharti Airtel (5.69 pct), M&M (5.15 pct), SBI (5.03 pct), Tata Power (4.98 pct), Dr Reddy's Lab (4.91 pct), NTPC (4.82 pct), Icici Bank (4.97 pct), HUL (4.79 pct), HDFC Bank (4.74 pct), Wipro (4.38 pct), Coal India (2.71 pct), ONGC (2.69 pct), RIL (1.07 pct) and Tata Motors (1.60 pct).

However, BHEL dropped by 4.99 pct followed by Hero Moto copr 3.42 pct, Sesa Goa 2.99 pct, Cipla 2.45 pct, Infosys 0.93 pct and Bajaj Auto 0.53 pct.

Among sectoral indices, S&P BSE-Bankex shot up by 4.99 pct, S&P BSE-FMCG 4.60 pct, S&P BSE-Auto 2.38 pct, S&P BSE-Metal 2.37 pct, S&P BSE-PSU 2.34 pct, S&P BSE-Power 2.16 pct, S&P BSE-Oil&Gas 1.97 pct and S&P BSE-CD 1.22 pct while S&P BSE-Realty dropped by 2.37 pct and S&P BSE-HC 0.51 pct.

Total turnover at BSE and NSE rose to Rs 10,307.45 crs and Rs 66,173.74 crs respectively as against the previous week level of Rs 9,343.92 crores and Rs 52,934.76 crore.

Continuing its rally for the third week, the rupee closed higher by 125 paise to 62.23 against the Greenback as fears over the capital outflows receded after US Federal Reserve Thursday refrained from reducing stimulus programme.

Sustained dollar selling by exporters and some banks, strong local equities and foreign funds buying in local stocks too kept the rupee tempo upbeat.

The US Federal Reserve on Wednesday unexpectedly kept its USD 85 billion bond-buying programme intact, making available liquidity for investing in emerging market assets, including local equities and bonds, and easing concerns about immediate capital outflows.

As a result, the rupee flared up by 161 paise on Thursday.

Sebi's steps to ease investment norms for overseas entities in government debt would attract more capital flows, also boosted the rupee sentiment.

At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced lower at 63.70 a dollar from 63.48 last weekend and immediately touched a low of 63.71. Later, it bounced back to a one-month high of 61.64 before settling the week at 62.23, a net gain of 125 paise or 1.97 pct. In three week, it has spurted by 347 paise or 5.28 pct.

The Indian benchmark S&P Sensex shot up by 530.95 points or 2.69 pct during the week, extending gains for the fourth straight week while FIIs injected USD 756.13 million on the first four days of the week as per Sebi data.

Meanwhile, the RBI Governor Raghuram Rajan, in his maiden mid-quarter monetary policy review on Friday, unexpectedly raised the short-term lending (repo) rate to 7.5 percent, seeking to tame inflation. The cash reserve ratio was unchanged.