Better-than-expected Chinese GDP numbers and a temporary solution to the US Government debt crisis saw foreign institutional investors

Better-than-expected Chinese GDP numbers and a temporary solution to the US Government debt crisis saw foreign institutional investors move into a ‘risk-off’ mode on Friday, driving the Sensex to its highest close in nearly three years.

While the Sensex closed at 20,883, up 467 points (2.29 per cent), the Nifty hit a five-month high at 6,189, up 144 points (2.37 per cent).

The sentiment was upbeat across-the-board on positive global cues after the end of US shutdown and easing concerns over the US tapering. Financial sector stocks were in the limelight. A booster also came from China’s National Bureau of Statistics reporting earlier in the day that the country’s GDP grew 7.8 per cent in the third quarter from a year ago.

There was heavy buying, especially by foreign institutional investors, in banking, metals, capital goods, realty and energy scrips. Among the 30 Sensex constituents, 29 ended the day with gains. Bajaj Auto was the sole loser.

FIIs were net buyers of equities worth Rs 1,753 crore, logging in a volume of about Rs 6,000 crore. Domestic institutional investors sold equities in the net, worth Rs 562 crore with a total volume of around Rs 2,750 crore. Retail investors on BSE offloaded net equities worth Rs 253 crore, with a volume of Rs 2,200 crore. Volatility dipped 4.46 per cent and the volatility index, India Vix, closed at 20.12.

“The initial set of numbers from large IT and banking stocks have been largely along expected lines. The markets will now look forward to the remaining results, largely of the domestically focused sectors. Any disappointments in those results may lead to stock-specific corrections,” said Dipen Shah, Head–PCG Research, Kotak Securities.

“The other trigger for the markets will be the Fed and the RBI policy meetings at the end of the month. Markets are largely expecting another hike in interest rates from the RBI, post the disappointing CPI (inflation) numbers.”

Monami Manna of Equentis Capital, a stock-broking firm, said in a report on India: “From a medium-term perspective, we are getting into a phase where politics will start to play an important role, especially time when we have seen a dramatic slowdown in our economy and investments have taken a beating. The confidence building exercise has to start and if we want to see growth coming back significantly from these levels, then some clarity in terms of how the political environment is shaping up will drive the market in the next couple of months.”

The rupee closed at Rs 61.27 to a dollar, down three paise. The yield on the benchmark 10-year G-Sec softened five basis points to 8.55 per cent. One basis point is one-hundredth of a percentage point.

(This article was published on October 18, 2013)
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