Benchmarks end higher ahead of Fed rate hike decision

Wednesday’s session turned out to be a good day of trade for the Indian equity markets, where frontline gauges garnered gains of around a percent, ending just shy of their crucial 26,000 (Sensex) and 7,900 (Nifty) bastions, as investors opted to buy beaten down but fundamentally strong stocks amid a firm trend overseas, ahead of the Fed’s rate decision this week. Sentiments remained up-beat with Cabinet approval of Shyama Prasad Mukherjee RURBAN Mission, allocating Rs 5,142 crore to develop 300 smart village clusters across the country. Also, there was report that the government panel set up to suggest a uniform rate of indirect tax under the GST regime will submit its report by this month-end and the roll out of the reform measure is possible any time next fiscal.

Investors overlooked weak economic data that the exports fell for the ninth consecutive month, dipping by 20.66 per cent in August to $21.26 billion on the back of a steep decline in engineering and petroleum shipments. Non-oil imports rose 7.01% to $26.38 billion whereas oil imports plunged 42.59% at $7.35 billion in August 2015 over August 2014. The trade deficit rose sharply to $12.47 billion in August 2015 from $10.66 billion in August 2014. However, India's services exports rose 0.3% to $13.39 billion in July 2015 over July 2014, snapping decline for last four sequential months.

Buying got intensified after European counters made a positive start and CAC, DAX and FTSE were trading with a gain of around a percent in early deals. Asian markets too ended mostly in green on Wednesday ahead of an announcement from the U.S. Federal Reserve on whether it would raise rates for the first time in almost a decade. A two-day meeting of the Federal Reserve, slated to start on Wednesday, could lead to the first interest-rate increase in almost a decade.

Back home, the market participants remained hopeful that the Reserve Bank of India (RBI) would go ahead with a rate cut in its next monetary policy meeting. Buying in software and technology stocks too aided the sentiments on the back of weakness in Indian rupee against dollar.

The NSE’s 50-share broadly followed index Nifty rose by over seventy points and ended just shy of its psychological 7,900 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around two hundred and sixty points to finish above the psychological 25,950 mark. Broader markets, however, struggled to get any traction and ended the session in red. The market breadth remained in favor of decliners, as there were 1,259 shares on the gaining side against 1,411 shares on the losing side while 116 shares remain unchanged.

Finally, the BSE Sensex surged by 258.04 points or 1.00% to 25963.97, while the CNX Nifty soared by 70.05 points or 0.89 % to 7899.15.

The BSE Sensex touched a high and a low 26006.75 and 25816.50, respectively. The BSE Mid cap index was down by 0.17%, while Small cap index was down by 0.44%.

The top gaining sectoral indices on the BSE were Bankex up by 1.42%, Power up by 0.70%, Healthcare up by 0.67%, TECK up by 0.56% and Auto up by 0.46%, while Consumer Durables down by 1.45%, Oil & Gas down by 0.60%, Capital Goods down by 0.46% and Realty down by 0.39% were the losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 2.48%, Sun Pharma up by 2.38%, Axis Bank up by 2.35%, Vedanta up by 2.12% and Hero MotoCorp up by 2.01%. On the flip side, BHEL down by 0.66%, Dr. Reddys Lab down by 0.60%, Larsen & Toubro down by 0.58% and Coal India down by 0.06% were the top losers.

Meanwhile, market regulator, the Securities and Exchange Board of India (SEBI) has called for a meeting with all the seven credit rating agencies in the wake of two recent downgrades in Jindal Steel & Power and Amtek Auto, which have caused turmoil in a few mutual funds. Sebi officials will be discussing with top managers from ratings agencies about market conditions and how the credit profile changes can impact the corporate bond market and the mutual fund industry. Sebi is also looking at the ratings processes of agencies, as any change in ratings usually has an impact on the market price and yield of the bond.

Late August, while CARE Ratings suspended its ratings on Amtek Auto and Brickworks downgraded the company, ICRA, on September 9, downgraded Jindal Steel & Power.Since some of the mutual fund schemes had exposure to bonds issued by these two companies and they face some losses. Sebi has said that it is working to protect the interest of investors in those mutual funds and has also asked fund houses about their exposure in these papers.

Sebi has also asked mutual fund houses to report the downgrades in the bonds in which they invest to their trustees on a real-time basis and then to the regulator on a monthly basis and about their exposure to corporate bonds. Most fund houses investing in India hold corporate debt until maturity. The regulator has asked funds for details that include the rationale for the purchase, and assessments of a credit downgrade risk.

The CNX Nifty touched a high and low 7913.90 and 7853.30 respectively.

The top gainers on Nifty were Yes Bank up by 4.12%, Ambuja Cement up by 2.74%, Axis bank up by 2.44%, Sun Pharma up by 2.33% and Bharti Airtel up by 2.26%. On the flip side, BPCL down by 1.75%, NMDC down by 1.52%, Bosch down by 1.46%, Asian Paints down by 1.11% and Cairn India down by 0.86% were the top losers.

European Markets were trading in the green; France’s CAC was up by 1.06%, Germany’s DAX was up by 0.42% and UK's FTSE was up by 0.77%. 

The Asian markets closed mostly in green on Wednesday, with Shanghai Composite halting a two-day slump, as investors returned to the market amid speculation of state-led buying. The Bank of Japan stated that Japanese factory output will remain flat in the current quarter and an expected pick-up in October-December is clouded with uncertainty as shipments to Asia take a hit from China’s slowdown. The cautious assessment underlines a waning conviction among central bank policymakers that Japan’s economy will make a solid rebound in July-September after shrinking in the second quarter. China’s non-financial outbound direct investment (ODI) rose 18.2% year-on-year to 473.4 billion yuan ($74.34 billion) in the first eight months of this year from the same period a year earlier. ODI outflows in August grew 7% from a year earlier to $13.5 billion. The commerce ministry last week stated that the country attracted 525.3 billion yuan or $85.3 billion in foreign direct investment (FDI) in the first eight months of 2015, up 9.2% from a year earlier. FDI inflows in August rose 22% from a year earlier to 54.2 billion yuan or $8.71 billion. Singaporean Unemployment Rate remained unchanged at 2.0% compared with the preceding quarter. KLSE Composite was closed on account of ‘Malaysia Day’ holiday.