Rate cut hopes dashed, Sensex loses steam

Rate cut hopes dashed, Sensex loses steam

Dashed hopes of a rate cut and lack of more reforms to push the economy led the equities markets to post marginal weekly losses for the trade ended Dec 5.

Losing 0.82 percent or 235.89 points, the Indian equities markets observed a mixed bag of sentiments.

"Markets ended the week with minor losses. Going ahead, we need to see increased investments in the economy, especially from the private sector," said Dipen Shah, head of private client group research, Kotak Securities.

On one hand, positive global cues like continuing ECB (European Central Bank), China and Japan's support to their economies led by higher liquidity, prevailing low crude oil prices, cheered-the market.

While, market expectations' about an interest rate cut from the central bank its fifth bi-monthly monetary policy review on Dec 2 were being left high and dry dampened senstiments.

However, the RBI's dovish statements gave a fill-up to the sentiments. RBI Governor Raghuram Rajan said a change in the monetary policy at the current juncture will be premature and he will wait for the decrease in inflation to continue.

He also mentioned the possibility of a rate cut early next year if the current downturn in inflation momentum continues.

Rajan even predicted an interest rate reduction "outside the policy review cycle" if the data so permits.

The benchmark Sensex was down by 0.82 percent or 235.89 in the week ended Dec 5 from its previous weekly close on Nov 28. The index closed at 28,458.10 points, while it had ended trade at 28,693.99 points points on Nov 28.

"Improvement at the ground level is one of the important determinants of the market movement, going ahead. Fiscal reforms, along with the consistent moderation in inflation, will pave the way for a softer interest rate regime," said Shah.

In the week ended Nov 21, was up by 1.26 percent or 359.36 in the week ended Nov 28 from its previous weekly close on Nov 21. The index closed at 28,693.99 points, while it had ended trade at 28,334.63 points points on Nov 21.

"Recent decline in oil prices will help govt. to reduce its subsidy. With inflation falling, Indian households will see real income improving. Thus we believe that India is entering a phase of lower risk," said Vinod Nair, head - fundamental research, Geojit BNP Paribas.

"It is true that domestic economy has stabilized and is in a healthy platform to strengthen ahead from international tailwinds. Higher spend & reform by government will settle to higher GDP growth."

Aanalyssts also point out that outcome of winter session, crude, metal prices and next Budget is very important for the market.

Supportive global cues and expectations of an early interest rate cut also kept foreign investor's interests alive in the Indian markets.

For the week ended Nov 28, the FPIs massively bought stocks in equity and primary markets worth Rs.4,031.88 crore or $650.67 million, according to data with the National Securities Depository Limited (NSDL).

For the week ended Nov 28, the FPIs purchased stocks in equities and primary market worth Rs.2,975.48 crore or $480.89 million

The foreign institutional investors (FIIs) along with sub-accounts and qualified foreign investors have been clubbed together by market regulator Securities and Exchange Board of India (SEBI) to create a new investor category called FPIs.

The FPIs had invested Rs.1,443.24 or $357.05 in the equities markets for the week under review.

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