Sensex closes rangebound session higher ahead of Fed rate decision; PSU banks zoom
Wed Jun 14 2017
Ramesh Sridharan (877 articles)

Sensex closes rangebound session higher ahead of Fed rate decision; PSU banks zoom

Equity benchmarks closed rangebound session marginally higher Wednesday as investors cautiously awaited US Federal Reserve’s monetary policy decision due tonight.

The 30-share BSE Sensex gained 52.42 points at 31,155.91 while the 50-share NSE Nifty managed to hold 9,600 level, up 11.25 points at 9,618.15.

Experts expect the benchmark indices to stay rangebound for couple of sessions due to lack of cues. Likely rate hike by Federal Reserve today may have already priced in by the market, they feel.

Jayant Manglik, President of Retail Distribution at Religare Securities has reiterated his view to keep hedged positions.

“No doubt, we’re in uptrend but intermediate corrective phases are hard to handle so restrict your positions in quality stocks and give preference to index majors for fresh buying,” he said.

Motilal Oswal said the Federal Reserve is expected to result in rate hike of 25 bps tonight, which would be fourth rate hike in this cycle, third in last six months.

According to the research house, the language of Federal Reserve, however, could offer some scope of surprise. It believes markets are likely to see a dovish hike rather than a hawkish hike. It also believes that after this hike, a third rate hike this year will happen only in December.

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PSU banks helped the broader markets to close in green, with the BSE Midcap index up 0.01 percent and Smallcap up 0.46 percent despite weak breadth. About 1,427 shares declined against 1,240 advancing shares on the exchange.

Meanwhile, WPI inflation for May slipped to 2.17 percent, the lowest since December 2016, against 3.85 percent in previous month due to lower food, primary articles and vegetables inflation.

Nifty PSU Bank index outperformed other sectoral indices (barring Realty), rising nearly 1 percent on hopes of merger and after RBI kicked off NPA resolution process by identifying 12 NPA accounts under the new bankruptcy code.

Allahabad Bank, IDBI Bank, Syndicate Bank, Andhra Bank, Bank of Baroda, Union Bank, PNB, Canara Bank and Bank of India gained 2-7 percent.

Dena Bank rallied nearly 9 percent. Government official said the Centre is aiming to merge the bank with stronger PSU lender, according to CNBC-TV18 reports.

ICICI Bank was up 1.4 percent as brokerage houses said it is a top pick among banks, citing likely benefits from NPA resolution.

Lupin gained 0.3 percent as the pharma major has received final approval for its Oxycodone Hydrochloride tablets from the US Food and Drug Administration. The generic version of Mallinckrodt Inc’s Roxicodone tablets is indicated for the management of pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate.

Reliance Industries was the leading contributor to Sensex’ gains, up 3.3 percent.

Engineering and construction major L&T was up 1.4 percent as Deutsche Bank raised target price on the stock to Rs 2,050 from Rs 2,000. CIMB also increased target to Rs 1,750 from Rs 1,600 on raising EPS forecast, though it downgraded to hold from add rating.

Dr Reddy’s Labs rose 1.4 percent on establishment inspection report from USFDA for API manufacturing plant at Miryalaguda that had received Form 483 with 3 observations on February 21.

In broader space, Greaves Cotton was up 4.5 percent on pact with US firm Pinnacle Engines for getting license for manufacturing & sale of internal combustion engines in India.

Emkay Global surged 10 percent on signing an agreement for co-branding and distribution of equity research with DBS Vickers, the Singapore subsidiary of DBS Bank.

Gitanjali Gems gained 3.7 percent as subsidiary Nakshatra received approval from SEBI for its IPO.
On the global front, European markets were higher ahead of monetary decision by the US Federal Reserve. France’s CAC, Germany’s DAX and Britain’s FTSE were up 0.5-1 percent at the time of writing this article. Asia closed mixed.

Ramesh Sridharan

Ramesh Sridharan

Ramesh Sridharan is our Stock Market Correspondent covering events and daily movements of stock markets in Asia. He is based in Mumbai

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