Sensex gains 377 pts on truce talks
BULL RUN Robust auto sales, hopes of rate cut by RBI aid rally; factory output expands for ninth month in September
MUMBAI: Indian markets turned more decisive on Monday as the Sensex jumped over 377 points, its biggest single-day gain in about a month, as investors hoped that the recent border clash with Pakistan may not escalate. Robust auto sales figures in September and expectations of a rate cut by the Reserve Bank of India (RBI) in its policy review on Tuesday also boosted sentiment.
The Sensex rose 377 points, or 1.4%, to close at 28,243.29, while the Nifty closed up 127 points, or 1.5%, up at 8,738.10.
The national security advisors of India and Pakistan have spoken over phone and agreed to reduce tensions on the Line of Control (LoC), Pakistani Prime Minister Nawaz Sharif’s adviser on foreign affairs Sartaj Aziz said on Monday as tensions soared between the two nations after India’s surgical strikes, Press Trust of India reported. Also, factory activity in India expanded for the ninth month in September, helped by new orders. The Nikkei India Manufacturing Purchasing Managers’s Indices (PMI) came in at 52.1 in September. A reading above 50 indicates expansion.
“There is some expectations of RBI reducing interest rates. Also the geo-political worries have reduced, which has also calmed nerves,” said Vinod Nair, head of research at Geojit BNP Paribas.
Tuesday’s policy will be the first under governor Urjit Patel, and also the first time by the Monetary Policy Committee.
Market though remained divided on whether the RBI will reduce rates on Tuesday. Around 60% of the 44 analysts polled by Reuters expect the RBI to leave rates unchanged, while the rest expect a 25 basis points reduction.
“The sharp fall in food prices raises, building ground for the RBI to reduce rates further. However, the monetary policy committee may prefer to wait for the December policy meeting for better clarity on domestic data; it could also wait for the result of the US election in November, as well as clarity on the US rate trajectory,” said Bansi Madhavani, analyst at India Ratings and Research.
Among Sensex stocks, Maruti Suzuki was the biggest gainer (up 3.7%), after the auto maker reported a 31% rise in sales last month. Among others, Hero Moto rose 3.2%, M&M was up 2.6% and Bajaj Auto gained 1.5%.
Sales of the top 10 passenger vehicle makers touched 2,74,615 units, up 21% from a year ago, according to monthly sales data from auto firms. Retail investors are increasingly preferring to invest in equities compared to traditional options of bank deposits or property. This trend has been backed by the rise in transactions in equity instruments in the current fiscal year so far. The total asset under management of the Nifty 50-based exchange traded funds crossed the ₹10,000 crore mark in April-September 2016. NSE’s market share in ETFs is 86%, while BSE accounts for the rest. An ETF is an equity instrument based on an index. After mutual funds, ETFs are seen as the most popular option among retail investors.
HTC/MUMBAI