18:17
Moneycontrol BureauBoth FOMC and RBI surprised the street this week, former helped the market close on a strong note, but latter capped gains.
The Sensex this week gained 531 points or 2.7 percent to close at 20263.71, and the Nifty rose 161.5 points or 2.8 percent to 6012.10.
Initially, the market remained lacklustre ahead of two major events - Fed meeting outcome and RBI monetary policy review. It gained momentum towards the end of Wednesday's session and continued till Thursday on Fed move, but the Friday's charge was with bear due to 'surprise' move of repo rate hike by RBI.
First event, the Federal Reserve said it would continue its monthly USD 85 billion bond buying programme , citing insufficient evidence of improvement in economic data to warrant a reduction in monetary stimulus. This move pushed Sensex 840 points higher in two days.
Strategists and traders were expecting the central bank to announce a USD 10- USD 15 billion reduction to its asset purchase program. The Fed also downgraded its outlook for the economy.
Now experts feel the US Fed may start reducing bond buying by December end .
Second event, new Reserve Bank of India governor Raghuram Rajan surprised the street, indicating that his focus will be on inflation. The central bank hiked repo rate by 25 bps to 7.5 percent to check higher inflation , but cut marginal standing facility (MSF) by 75 bps to 9.5 percent to maintain liquidity in the system.
Also Read - Rajan to FM: Fight inflation with me, or walk alone
Beyond the specific measures announced today, the message is clear that there will be much greater attention paid to CPI, going forward, Sajjid Chinoy of JPMorgan says.
Chinoy expects MSF to be reduced a bit more in the coming weeks.
On the other hand, he says any action on the repo rate will depend on the factors such as; how strong the monsoon is, how much inflation will come off, what is the translation from currency weakness to input prices and core inflation and how do global commodities react now that the tapering is being pushed out for another three months. If the inflation continues to remain high or rises further then the RBI will probably hike the repo rate again, he adds.
RBI also cut minimum CRR from 99 percent to 95 percent though it left cash reserve ratio (CRR) unchanged.
Rate sensitives butchered today, especially banks and realty, but in the week - Bank Nifty gained around 5 percent while BSE Realty fell more than 2 percent.
BSE FMCG Index gained 5 percent followed by Metal, Auto, Power and Oil & Gas with more than 2 percent gains.
BPCL , Grasim Industries , Maruti Suzuki, Asian Paints , GAIL , Reliance Infrastructure , JSPL, ACC , UltraTech Cement and ITC were major gainers, rallying between 7-12 percent.
However, Ranbaxy Labs tanked more than 25 percent on USFDA woes. BHEL , DLF , Hero MotoCorp and Sesa Goa lost 3-4 percent.
Among midcaps, Hanung Toys , Ajanta Pharma and Shriram City gained the most with 20-26 percent gains whereas Gitanjali Gems , MTNL , Uflex , Educomp and Opto Circuits lost 14-17 percent.
Meanwhile, the rupee closed at 62.25 against the dollar on Friday, up 124 paise during the week.
Foreign institutional investors have bought more than Rs 5,500 crore worth of shares this week (including today's provisional figure).
(Posted by Sunil Shankar Matkar)
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