Bulls make emphatic comeback as monsoon, dovish Fed lend support

Benchmarks rise 3% this week led by gains in Reliance Industries & other blue chips

Mumbai, June 19

EQUITIES climbed for a sixth day, with the benchmark gauge ending three weeks of losses, as better- thanforecast rains eased concern about the central bank’s ability to lower interest rates.

M&M rose the most in three weeks amid speculation abovenormal rainfall will boost farm incomes. HDFC climbed for a third day, and Reliance Industries completed its best week in six years.

The S&P BSE Sensex advanced 0.7% to 27,316.17 at the close Friday. The gauge climbed 3.4%this past week, its best performance since the five days through January 25, as the progress of the monsoon spurred optimism food costs won’t spike and cap the central bank’s scope to cut interest rates. Shares also rose after Federal Reserve chair Janet Yellen said she still wants to see more evidence of a lasting turnaround before raising near-zero borrowing costs.

“The monsoon was clouding the outlook, but the big, dark clouds now have a silver lining,” said P Phani Sekhar, fund manager at Karvy Stock Broking. “The Fed commentary too has been more benign WEEKLY GAINERS & LOSERS SENSEX GAINERS than expected.”

Trading volumes were as much as 22% below the 30-day average after a decade-high amount of daily rainfall in June forced Mumbai’s commuter trains to halt. The downpour affected all the three train networks that carry as many as 8 million people every day, including traders in the financial markets.

Almost 80% of India has received excess or normal rain sinceJune1,defyingforecastsby the weather bureau that El Nino would curb rainfall. Mumbai is likely to get heavy rains in the next 24 hours, the state-owned agency said Friday.

The June-September monsoon rains help water more than half of India’s farmland, where sowing begins in June.

M&M increased 4.1% to its highest close since January 28. ITC capped its sixth day of gain, the longest run since November.

HDFC climbed 1.8%. Reliance Industries added 1.8%, taking the week’s rally to 12%, the most since March 2009.

Inter national investors sold a net $130 million of Indian stocks on Wednesday, June 17, paring this year’s inflows to $6.4 billion.

The Sensex has dropped 0.7% this year and trades at 15.2 times projected 12-month profits, versus the five-year average of 14.4. The MSCI Emerging MarketsIndexisvaluedatamultiple of 12, data compiled by Bloomberg show.

The total market valuation of listed companies at the BSE regained the R100 lakh croremark.The total market capitalisation was R1,00,04,412 crore at close. Investor wealth of BSElisted firms had on June 3 slipped below the crucial R100lakh crore mark. Agencies