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Business News/ Market / Stock-market-news/  Sensex, Nifty close at over 7-month high on central bank cues
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Sensex, Nifty close at over 7-month high on central bank cues

Sensex closes 232.22 points up at 27,009.67, its highest close since 28 October 2015

State Bank of India and ICICI Bank were the best performers on the S&P BSE Sensex with 5.40% and 4.31% gain, respectively. Photo: Aniruddha Chowdhury/MintPremium
State Bank of India and ICICI Bank were the best performers on the S&P BSE Sensex with 5.40% and 4.31% gain, respectively.

Photo: Aniruddha Chowdhury/Mint

Mumbai: India’s benchmark indices jumped to their highest close in more than seven months on Tuesday, in line with the gains in world equities, after US Federal Reserve chairperson Janet Yellen reposed her faith in US growth and indicated that the interest rates wouldn’t be prematurely raised.

Also on Tuesday, the Reserve bank of India in its bi-monthly policy review, kept the interest rates unchanged while taking an accommodative stand.

On Monday night, Yellen reiterated that the US economy still has forward momentum and that consumers could provide a significant step up in spending in this quarter to propel overall growth. But Yellen was silent on timing of the next rate increase, playing down a June move and raising doubts about July.

BSE’s market capitalization crossed the R100-trillion mark on Tuesday, for the first time since 1 January.

BSE’s 30-share Sensex closed 0.87%, or 232.22 points, higher at 27,009.67 points, its highest close since 28 October, while National Stock Exchange’s 50-share Nifty climbed 0.80%, or 65.40 points, to close at 8,266.45 points—its highest closing level since 23 October.

Earlier in the day, the Sensex rose as much as 1.14%, or 305.18 points, to 27,082.63, its highest level since 29 October, while Nifty traded as much as 1.14% up, or 93.90 points, at 8,294.95, its highest level since 26 October.

“I think the sentiment was helped by stronger world equities. Globally, the markets traded higher as Yellen’s concern on payroll data means the US interest rate hike could be off the burner for the June meeting," said Vaibhav Sanghavi, managing director, Ambit Investment Advisors Pvt. Ltd.

The US Fed officials are set to meet on 14-15 June.

“From here on, India markets could continue to see the strong momentum, unless any negative global macro development hampers the scene," added Sanghavi.

NSE’s volatility index (VIX) shed 3.16% to 14.87, indicating that there may be lesser volatility in the days to come.

With the event risk of the RBI policy out of the way, the markets, which had opened higher gained further traction after the policy announcement, dealers said. “There were no unexpected negative surprises in the policy, and with world markets trading higher and flows continuing, our market moved upwards post the policy announcement too," said Rikesh Parikh, vice-president of equities at Motilal Oswal Financial Services Ltd.

A few dealers also indicated that there was possible large buying, specially in frontline stocks, after the central bank policy announcement.

According to provisional data from NSE, foreign institutional investors (FIIs) and domestic institutional investors (DIIs) were net buyers of Indian equities for 499.73 crore and 46.33 crore, respectively.

FIIs have been net buyers of Indian shares for 10 sessions in a row, and have pumped in a net of $2.57 billion since the start of the year to Monday.

Among sectoral indices, rate sensitives such as BSE Realty Index and BSE Bankex were the top gainers, rising 1.70% and 1.63%, respectively, on Tuesday.

“RBI is in a wait-and-watch mode wanting further clarity on monsoon, global crude oil prices, macroeconomic and financial developments," said Crisil Research in a note, adding that it expects another 25 basis point (bps) cut in interest rates this fiscal year.

One basis point is one-hundredth of a percentage point.

“RBI’s policy stance remains accommodative, but before wielding the knife on interest rates, it will monitor the growth recovery, US fed action, monsoons, trend in food inflation and watch how the things unfold in the money market," Crisil analysts said.

In Tuesday’s trade, top lender State Bank of India advanced 5.40% and was the top gainer among Sensex stocks.

Rival ICICI Bank Ltd followed with a 4.31% gain.

Bloomberg contributed to this story.

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Published: 07 Jun 2016, 09:52 AM IST
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