Markets trade firm in early deals on positive global cues

Indian equity benchmarks extended their previous session’s gains with optimistic start on Tuesday tracking overnight rally on Wall Street coupled with positive cues from other Asian counterparts. Domestic indices are trading firm in early deals with gains of over a percent each on account of healthy buying in Auto, Capital Goods and TECK counters. Sentiments got a boost with RBI Monetary Policy Committee (MPC) member Jayanth R Varma’s statement that ‘No doubt inflation will come down. Because we have done monetary policy tightening. That tightening will have its impact. The monetary policy takes, you know, five to six quarters to have its impact and cool prices’. Some support also came in as a new Multidimensional Poverty Index (MPI) released jointly by the United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI) at the University of Oxford showed that the number of people living below the poverty line in India decreased by 415 million between 2005-06 and 2019-21. More optimism came in as rupee opened higher against dollar led by the impact of the fall in UK bond yields.

Most of the Asian markets are trading higher following the broadly positive cues from global markets overnight, as market sentiment was boosted by the news that Britain's new finance minister Jeremy Hunt reversed almost all of the tax measures announced by his predecessor Kwasi Kwarteng in the mini-budget last month. Stability in the bond markets and weakening of the U.S. dollar also aided market sentiment. Back home, sugar industry stocks were in focus as industry body ISMA said the country's sugar production is projected to be 36.5 million tonnes in the 2022-23 marketing season, an increase of 2 per cent compared to the year-ago period. In stock specific developments, Aster DM Healthcare gained as arm forms pharmacy JV in Saudi Arabia. LTI and Mindtree rise as NCLT sanctions their merger.

The BSE Sensex is currently trading at 59037.31, up by 626.33 points or 1.07% after trading in a range of 58744.13 and 59039.80. There were 29 stocks advancing against 1 stock declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.46%, while Small cap index was up by 0.62%.

The top gaining sectoral indices on the BSE were Auto up by 1.30%, Capital Goods up by 1.27%, TECK up by 1.25%, Power up by 1.19%, Utilities up by 1.18%, while there was no loser on the BSE sectoral front.

The top gainers on the Sensex were Bharti Airtel up by 2.28%, Larsen & Toubro up by 1.91%, HCL Technologies up by 1.82%, Mahindra & Mahindra up by 1.82% and Wipro up by 1.68%. On the flip side, Axis Bank down by 0.15% was the sole loser.

Meanwhile, the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) member Jayanth R Varma has said that the impact of monetary policy tightening on inflation will be felt after five to six quarters. The central bank is mandated to keep inflation at 4 per cent with 2 per cent of upside and downside margins. In order to control rising inflation, the RBI on September 30, has raised short-term lending rate for the third consecutive time by 50 bps to take the repo rate to 5.9 per cent. Since May it has cumulatively increased the key interest rate by 190 bps.

He said ‘No doubt it (inflation) will come down. Because we have done monetary policy tightening. That tightening will have its impact. The monetary policy takes, you know, five to six quarters to have its impact and cool prices’. India’s consumer price index (CPI) based inflation in September rose to five-month high of 7.41 per cent from 7 per cent recorded in the preceding month, with the print remaining well above the upper tolerance level of RBI’s inflation targeting framework for the ninth consecutive month. He added that ‘We started only in April. We will start seeing the effect of that tightening later in the year’.

Varma noted that India’s economic growth has actually been depressed for many years now. He said ‘We are not fearing recession to say but growth is not what we would like’. He also said ‘there is the dual challenge. Economic growth is below what we would like, inflation is higher than what we would like, and that poses a difficult challenge for the monetary policy’. He said that the Monetary Policy Committee is prioritising inflation right now, and trying to bring inflation under control and then move from that.

On the Indian rupee touching a historic low, MPC member pointed out that the US dollar is strengthening against almost every currency. Noting that the US economy is doing pretty well, he said that the combination of economic growth plus tight monetary policy will tend to appreciate the dollar, ‘which is what we have seen in the past as well’. He said ‘the danger is much higher when the rupee is weak than when the dollar is strong’.

The CNX Nifty is currently trading at 17496.35, up by 184.55 points or 1.07% after trading in a range of 17434.05 and 17500.25. There were 46 stocks advancing against 4 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 2.25%, Hindalco up by 2.14%, Mahindra & Mahindra up by 2.00%, Larsen & Toubro up by 1.81% and Reliance Industries up by 1.72%. On the flip side, Apollo Hospital down by 0.62%, BPCL down by 0.22%, NTPC down by 0.09% and Divi's Lab down by 0.02% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 surged 371.27 points or 1.39% to 27,147.06, Hang Seng jumped 138.25 points or 0.83% to 16,751.15, Taiwan Weighted rose 71.98 points or 0.56% to 13,038.03, KOSPI advanced 18.56 points or 0.84% to 2,238.27 and Shanghai Composite was up by 4.80 points or 0.16% to 3,089.74. On the other hand, Straits Times fell 0.14 points to 3,015.61 and Jakarta Composite was down by 6.38 points or 0.09% to 6,824.74.