Snapping three-day losing streak,
Indian equity benchmarks ended the Wednesday's trade in green terrain,
following the outcome of Reserve Bank of India's (RBI's) bi-monthly policy meet
where the central bank maintained its neutral stance. However, the RBI for the
first time in four-and-half-years raised key interest rate by 25 basis points
to 6.25% on inflation concerns arising from surge in international oil prices.
Markets, after making a flat to positive start, gained traction and traded
jubilantly throughout the day, as traders took some encouragement with a
private report stating that the government has effected a major overhaul of its
credit guarantee scheme to make adequate loans available to micro and small
enterprises easily by more than tripling its corpus to Rs 8,000 crore and
allowing non-banking financial companies (NBFCs), along with banks, to avail of
official guarantees to extend credit to such units. Market-men also took some
support from a report stating that riding high on the success of UPI-based
payments system, the digital payments in India has tripled to 7% of GDP from
2.5% three years ago. However, domestic bourses witnessed some selling in last
leg of trade with RBI raising repo rate by 0.25%. The reverse repo rate under
the liquidity adjustment facility (LAF) stands adjusted to 6%, and the marginal
standing facility (MSF) rate and the Bank Rate to 6.50%. The decision of the
MPC is consistent with the neutral stance of monetary policy in consonance with
the objective of achieving the medium-term target for consumer price index
(CPI) inflation of 4% within a band of +/- 2%, while supporting growth. The
selloff proved short-lived and markets ended near intraday high levels with
Sensex and Nifty ending tad below their crucial 35,200 and 10,700 levels,
respectively. Sentiments also remained upbeat with World Bank in its latest
report stated that India is projected to regain its position as the world's
fastest growing major economy advancing 7.3% this fiscal year and 7.5% in the
next two as factors holding back growth in India fade. Finally, the BSE
Sensex surged 275.67 points or 0.79% to 35,178.88, while the CNX Nifty was up
by 91.50 points or 0.86% to 10,684.65.
The US markets ended
significantly higher on Wednesday, on receding trade-war fears and good
economic data. White House economic
adviser Larry Kudlow said that US President Donald Trump is set to hold
bilateral meetings with French President Emmanuel Macron and Canadian Prime
Minister Justin Trudeau during a summit of the Group of Seven leading
industrialized nations later this week. Besides, investors remained on alert
for developments surrounding trade policy. Treasury Secretary Steven Mnuchin
reportedly urged President Donald Trump to exempt Canada from metals tariffs at
a meeting Tuesday, and a separate report indicated that China offered to buy
some $70 billion of US goods to get the Trump administration to cool its tariff
threats. On the economic front, the US trade deficit shrank 2.1% in
April-before the Trump tariffs took effect-and tumbled to a seven-month low.
But the gap is still on track to widen in 2018 to the highest level in a
decade. Meanwhile, the government said that the productivity of American
businesses rose at a revised 0.4% annual pace in the first quarter instead of
0.7% as originally reported. Output-or goods and services produced-climbed 2.7%
instead of 2.8%, while unit-labor costs, or how much it costs to make each
product, rose by 2.9%, a bit higher than the preliminary 2.7% estimate. The Dow
Jones Industrial Average surged 346.41 points or 1.40 percent to 25146.39, the
S&P 500 increased 23.55 points or 0.86% to 2772.35 and the Nasdaq was up by
51.38 points or 0.67 percent to 7689.24.
Resuming southward journey, crude
oil futures settled at 2-month low on Wednesday after a day of halt, on a
surprise weekly climb in domestic crude inventories. The US Energy Information
Administration (EIA) on Wednesday reported that crude supplies climbed by 2.1
million barrels for the week ended June 01. The EIA also reported that total
domestic crude production rose by 31,000 barrels a day to fresh weekly record
of 10.8 million barrels a day. Besides, gasoline stockpiles jumped 4.6 million
barrels for the week, while distillate stockpiles rose 2.2 million barrels. Benchmark
crude oil futures for July delivery declined 79 cents or 1.2 percent to settle
at $64.73 a barrel on the New York Mercantile Exchange. August Brent crude fell
2 cents to settle at $75.36 a barrel on London's Intercontinental Exchange.
Indian
rupee ended stronger against the US dollar on Wednesday, as the RBI's Monetary
Policy Committee decided to hike its key policy rate, the repo rate, by 25
basis points to 6.25 per cent, in its second bi-monthly meeting for the fiscal.
This was its first hike in four-and-half-years. Such a rate hike can send a
signal for foreign investors that the returns in India could be going up.
Hence, FPI flows could look positively now considering that they have been
negative so far this year. Some optimism also spread among the investors with
World Bank's report stating that India is projected to regain its position as
the world's fastest-growing major economy advancing 7.3 per cent this fiscal
year and 7.5 per cent in the next two as factors holding back growth in India
fade. Moreover, persistent foreign capital inflows into equity market along
with dollar's weakness against some currencies overseas amid lingering concerns
about global trade, gave the uptrend some momentum. On the global front, euro
rose to a ten-day high on Wednesday, after hawkish comments from the European
Central Bank, adding upward pressure to bond yields and sinking some stocks as
worries over Italy also weighed. Finally, the rupee ended at 66.93, 22 paise
stronger from its previous close of 67.15 on Tuesday.
The
FIIs as per Wednesday's data were net buyers in equity and debt segments both. In
equity segment, the gross buying was of Rs 5096.29 crore against gross selling
of Rs 4962.07 crore, while in the debt segment, the gross purchase was of Rs
932.87 crore with gross sales of Rs 719.09 crore. In the hybrid segment, the
gross selling was of Rs 0.49 crore against no buying.
The US markets ended higher on
Wednesday amid a pullback by U.S. treasuries after European Central Bank chief
economist Peter Praet indicated the ECB will discuss ending its bond purchasing
program at a meeting next week. All the Asian markets are trading in green in
early deals on Thursday ahead of a meeting of major industrialized economies
overshadowed by tension over U.S. steel tariffs. Indian equity benchmarks ended
higher on Wednesday as investors took the RBI rate hike decision in their
stride. Today, the markets are likely to make an optimistic start amid firm
global cues. Sentiments will remain buoyed with World Bank's statement that
India will retain the tag as the world's fastest growing major emerging economy
for the next three years. The bank's June 2018 edition of the Global Economic
Prospect report pegged India's GDP growth at 7.3 percent in FY 2018-19 and 7.5
percent in FY 2019-20, reflecting robust private consumption and strengthening
investment. Traders will also get some support with RBI Governor Urjit Patel's
statement that there are no implications on non-performing assets (NPAs) of
banks because of farm loan waivers provided by various states. However, there
will be some concern in the market with report that foreign direct investment
(FDI) to India declined to $40 billion in 2017 from $44 billion in the previous
year. FDI inflows to South Asia contracted by 4 per cent to $52 billion, owing
to a drop in inflows to India. Some concern may also arise on report that the
RBI's decision to increase the key lending rate by 25 basis points will hurt
India's growth prospects and hit business sentiment.
Support and
Resistance: NSE (Nifty) and BSE (Sensex)
Index
|
Previous close
|
Support
|
Resistance
|
NSE Nifty
|
10,684.65
|
10,615.32
|
10,726.17
|
BSE Sensex
|
35,178.88
|
34,973.32
|
35,307.49
|
Nifty Top volumes
Stock
|
Volume
|
Previous close
(Rs)
|
Support (Rs)
|
Resistance (Rs)
|
(in Lacs)
|
Vedanta
|
198.31
|
246.45
|
242.90
|
249.30
|
Tata Motors
|
197.54
|
295.65
|
288.30
|
299.95
|
SBI
|
183.15
|
270.15
|
264.43
|
273.63
|
ICICI Bank
|
168.74
|
283.90
|
281.03
|
286.83
|
Yes Bank
|
82.11
|
339.15
|
334.28
|
342.28
|
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