Europe lifts Sensex 118 pts, Nifty above 8100; RBI MPC meet eyed
Mon Dec 05 2016
Rajesh Sharma (2002 articles)

Europe lifts Sensex 118 pts, Nifty above 8100; RBI MPC meet eyed

Equity benchmarks started off the week on a positive note Monday, especially ahead of monetary policy committee meeting that will start tomorrow. Sharp recovery in Europe after Italian referendum also boosted the market sentiment. The Nifty struggled below 8100 level, before the recovery in last couple of hours of trade.The 30-share BSE Sensex was up 118.44 points at 26349.10 and the 50-share NSE Nifty rose 41.95 points to 8128.75 despite weakness in services PMI. The BSE Midcap marginally outperformed benchmarks, rising 0.66 percent on positive breadth. About 1510 shares advanced against 1117 declining shares on the exchange.

Analysts strongly expect the RBI to cut repo rate by 25 basis points but they will closely watch commentary, especially after currency demonetisation. Overall, the market is expected to be rangebound in December, they feel.

Naresh Takkar of ICRA expects a 25 bps reduction in the repo rate in the upcoming policy review in December 2016, which would support sentiment amidst the temporary slowdown in economic activity.

According to him, the RBI may also outline measures to manage systemic liquidity, such as the timeline for issuance of securities under the market stabilisation scheme and open market sale of securities. A rate cut and clarity on liquidity management would provide a strong signal to the banks to lower deposit and lending rates, Takkar says.

Harendra Kumar of Elara Capital says domestic institutional investors are still buying in a big way and a check with foreign institutional investors also suggests they see the recent market decline as a temporary blip and are keen to pick up quality stocks.

European stocks recovered after earlier losses following the announcement from Italian Prime Minister Matteo Renzi that he intended to resign after a defeat in a key referendum. France’s CAC and Germany’s DAX rose over a percent at the time of writing this article. However, Asia ended lower with the China’s Shanghai down over a percent.

Meanwhile, after currency demonetisation, the Nikkei/Markit Services Purchasing Managers’ Index, which tracks services sector companies, dropped to 46.7 in November from October’s 54.5, the first time since June 2015 that the index has gone below the 50 mark that separates growth from contraction.

Banks, FMCG, auto and telecom stocks supported the market while technology stocks were under pressure.

Asian Paints and Mahindra & Mahindra topped the buying list, up 3.4 percent each. Maruti Suzuki and Bharti Airtel gained 2.7 percent each. Cigarette major ITC was the leading contributor to Sensex’s gains, up 1.7 percent.

Lupin rose 3.2 percent after the company received approval from the US FDA for generic Norco tablets that are used as a pain reliever.

Bank Nifty gained 0.88 percent as State Bank of India, PNB and Bank of Baroda gained more than 1 percent. HDFC Bank and ICICI Bank rose nearly half a percent.

HDFC fell more than 4 percent in early trade but it recovered a bit in later part of the session, down 1.6 percent at close. TCS (down 1.6 percent), Infosys (down 0.3 percent) and Wipro (down 0.84 percent) too ended lower.

Rajesh Sharma

Rajesh Sharma

Rajesh Sharma is Correspondent for Stock Market of South East Asia based in Mumbai. He has been covering Asian markets for more than 5 years.

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