The Indian markets despite some profit taking in final hours managed to post good gains in the last session. Today, the start is likely to be in green and the markets will extend the gaining momentum after the RBI’s surprise 50 bps rate cut. Traders will be getting some support with a report that India has become the top destination for FDI in the world. With $31 billion of foreign capital inflows, India has surpassed China and the US to take the pole position in attracting largest FDI in the first half of 2015. Also, the Chief Economic Advisor Arvind Subramanian has said that the government is committed to contribute its share by adhering to its fiscal deficit target so that inflationary pressures remain under control. Apart from the equity markets there will continue to be buzz in the debt market after Reserve Bank of India (RBI) hiked the investment limit of the foreign portfolio investors (FPIs) in the Central government bonds, and also allowed them to invest in the State government bonds. There will be some action in the power sector, as the Power and Coal Minister Piyush Goyal has said that global investors are willing to commit up to $ 10 billion in the country's renewable energy sector.
The US markets made a mixed closing in last session, while the Nasdaq extended its decline, the Dow and S&P 500 ended modestly higher. Though, traders mostly reacted positively to a report from the Conference Board showing an unexpected improvement in US consumer confidence in the month of September. The Asian markets have made a mixed start with some of the indices still trading in red, though the Japanese markets has bounced back from its last session’s sharp fall.
Back home, Tuesday’s session turned out to be a fabulous day of trade for the Indian equity markets, where frontline gauges garnered gain of over half a percent after Reserve Bank Governor Raghuram Rajan surprised street with a rate cut of 50 basis points. Earlier markets made gap-down start and traded choppy in early deals, tracking weak global cues. But markets witnessed a wild swing and entered into green terrain after Rajan in his bi-monthly monetary policy announcement cut the policy interest rate to a 4-1/2-year low of 6.75 per cent, in a move that, with inflation running at record lows, could help an economy in danger of slowing down. Some support also came with Finance Minister Arun Jaitley’s statement that he is confident of maintaining fiscal deficit at 3.9 per cent in the current financial year and extremely keen to better the 7.3 per cent growth of fiscal year 2014-15. However, markets ended off day’s high as investors booked some of their profit at higher levels in last leg of trade after Reserve Bank of India (RBI) revised downwards its real GDP forecast for 2015-16 to 7.4 per cent from earlier expectation of 7.6 per cent, saying that the growth is expected to pick up in the latter part of the fiscal. It added that the CPI inflation is expected to firm up from its current trough and rise to around 4.5 per cent in September as favourable base effects reverse and average 5.5 per cent in the third quarter and 5.8 per cent in the fourth quarter of FY16. In its policy review it said that the CPI inflation is expected to average 5.5 per cent in FY17 and moderate to around 4.8 per cent in Q4 of FY17. On the global front, European counters, after making an awful start, witnessed some recovery, while Asian markets ended in red. Back home, buying in rate sensitive counters viz, banking, realty and auto too aided the sentiments after RBI’s cut rate by 50 bps. Software stock too remained on buyers’ radar after rupee dropped against the dollar. On the flip side, shares of oil exploration firms dropped after the crude oil prices dropped. Finally, the BSE Sensex surged by 161.82 points or 0.63% to 25778.66, while the CNX Nifty gained 47.60 points or 0.61% to 7843.30.
