Sensex rides hope rally to scale 32K

Market movement driven by reform push, ratecut expectations amid weak earnings, industrial growth

India’s benchmark equity indices rose to fresh lifetime highs on Thursday, fuelled by investor expectations of an interest rate cut by the Reserve Bank and a positive sentiment around economic reforms led by the goods and services tax.

The Sensex breached the 32,000-point mark and closed the day at 32,037.38, up 0.73% from Wednesday’s close. The Nifty closed just 8.3 points short of 9,900.

A record low inflation reading is being seen as a precursor to a rate cut in the central bank’s August policy review but the market rally driven by hope belies weak underlying fundamentals.

The government has implemented much-needed reforms, including loosening controls on foreign investment and removal of price controls, and is focusing on building infrastructure, measures that are likely to iron out wrinkles from the fallout of demonetisation and help the economy recover.

Although industrial output growth slowed to 1.7% in May from 3.1% the month before and April-June corporate results are likely to mirror the weak trend of the previous quarter, a rate cut in August could spur enough growth to make up for the slow start to the current financial year.

For now, however, information technology bellwether Tata Consultancy Services kicked off a weak corporate earning quarter, reporting a 10% quarter-onquarter drop in its Q1 net profit at ~5,950 crore on Thursday, the biggest dip in two years.