Nifty will head higher subject to dips caused by global sell-offs
Market sentiments were boosted by the surprise rate cut from Reserve Bank of India (RBI) on Thursday, which resulted in the benchmarks recording strong gains. We had mentioned in Wednesday’s closing report that a close above yesterday’s high will support a bullish position although the indices were weakening. The big gap in opening on Thursday was followed by the indices progressively moving higher except for some volatility at the beginning and at the end of the session.
S&P BSE Sensex opened at 27,831 while CNX Nifty opened at 8,425. Sensex moved from the low of 27,704 to 28,195 and closed at 28,076 (up 729 points or 2.66%). The 50-share Nifty hit a low 8,381, moved to the level of 8,527, and closed at 8,494 (up 217 points or 2.62%). NSE recorded a volume of 107.84 crore shares. India VIX fell 6.31% to close at 16.1600.
Before the market opening today, RBI announced a surprise cut in repo rate under the liquidity adjustment facility by 25 basis points to 7.75%.
Finance Minister Arun Jaitley hailed the decision of RBI to cut the interest rate, saying it is a positive development for the Indian economy and will certainly help in reviving the investment cycle the government is trying to restore.
The RBI's unexpected 25 basis points rate cut does not change the country's sovereign credit profile, an analyst at Fitch Ratings told the media.
Interest rate sensitive stocks like HDIL (18.59%), Indiabulls Real Estate (10.55%) and DLF (10.39%) were among the top four gainers in the ‘A’ group on the BSE.
Pipavav Defence and Offshore (4.50%) was the top loser in ‘A’ group on the BSE. In it December 2014 ending shareholding pattern the FIIs holding were reduced from 2.28% in September 2014 to 1.36%, DIIs holding were also reduced from 14.03% to 13.56% while retail shareholding were increased from 39.19% to 40.58%.
Except for Hindalco (0.18%) and Hindustan Unilever (0.05%) all the other stocks in the Sensex 30 pack closed in the green. HDFC (7.16%) was the top gainer followed by SBI (5.02%) and ICICI Bank (4.60%).
On Wednesday, US indices closed in the red. US retail sales dropped 0.9% in December, the biggest slide since January 2014, following a 0.4% gain in November that was smaller than previously estimated, according to the Commerce Department.
Except for NZSE 50 (0.12%) and Taiwan Weighted (0.16%) all the other Asian indices closed in the green. Shanghai Composite (3.54%) was the top gainer.
In China, the latest data showed that Chinese banks issued 697.3 billion yuan ($112.5 billion) worth of new loans in December, down from 852.7 billion yuan in November. Total social financing, a broader measurement of credit in the economy, rose to 1.69 trillion yuan in December from 1.15 trillion yuan in November. China's foreign exchange reserves stood at $3.84 trillion at the end of December, down from $3.89 trillion at the end of September.
European indices and US premarket futures were extremely volatile in the afternoon (declining deeply into the red from a strong rally) after Swiss National Bank shocked investors by removing its currency ceiling against the Euro and slashing its deposit rate to negative 0.75%. This is what caused the sharp selloff later in the session in India.
However, at the time of writing, European markets had turned around strongly and US Futures were trading in the green.