Benchmarks rise over 2 per cent each as softening crude & strengthening rupee boost sentiment

Mumbai:Stocks were resurgent across global markets on Friday after carnage over the past few days, helping the Sensex and Nifty post their first weekly gain in six weeks and lifting the mood among investors who had lost most of the profits they made in 2018. Indian equities posted their biggest daily rise in 29 months as the overnight fall in global crude oil prices and the rupee’s newfound strength buoyed the markets.

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The Sensex closed at 34,733 points, up 2.15 per cent, while the broader Nifty climbed 2.3 per cent to close at 10,472. The BSE’s midcap and smallcap indices gained 2.4 per cent and 2.6 per cent, respectively. The bounceback came a day after both the benchmark indices fell over 2 per cent to six-month lows. India VIX, or the volatility index, fell 9.3 per cent to 18.62 on Friday, reflecting the easing of nerves. For the week, the Sensex gained 1 per cent. The stock market last witnessed a prolonged selloff, of eight weeks, in May-June 2008 amid the global financial crisis.

The rescue package for finance companies by State Bank of India earlier this week helped calm investors. Concerns over asset-liability mismatches at NBFCs sparked by IL&FS’ defaults had led to panic on Indian bourses.

Still, foreign portfolio investors extended their selling spree, dumping shares worth Rs 1,322 crore on Friday. Domestic institutions continued to pick up the slack, buying shares worth Rs 1,287 crore, provisional exchange data showed.

The rupee rose against the dollar on Friday for the third session, cheered by the fall in oil prices. It closed at 73.57 per dollar, compared with Thursday’s 74.13. The import curbs imposed on Thursday also helped the rupee.

“While crude oil prices are showing signs of stability, the dollar index too has fallen. A combination of both triggered the rupee’s gains on Friday,” said Bhaskar Panda, senior vice-president, treasury advisory group, HDFC Bank. “In the short term, the rupee’s move would be largely driven by global developments.” The dollar index, which measures the unit against other major world currencies, has dipped 0.70 per cent since October 10 amid fading global concerns.

Bandhan exempted from share sale cap

Sebi exempted Bandhan Bank from the restriction on promoters selling shares within a year of listing, paving the way for stake dilution through acquisitions to comply with RBI norms.

Volatility in equities to persist

Brent crude, slightly above $80 a barrel, has dropped over 5 per cent in the last two sessions as the Organization of the Petroleum Exporting Countries (Opec) said it was offsetting the production shortfall on account of Iran and Venezuela. This, along with comfortable oil inventory data from the US, softened prices. Last week, Brent crude went past $86 a barrel for the first time in nearly four years. The spike in crude prompted overseas investors to dump Indian shares, causing the rupee to plummet to record levels. India imports almost 80 per cent of its oil requirements. So far in October, foreign investors have sold stocks worth a net Rs 17,600 crore after offloading shares worth Rs 9,600 crore in September.

Market participants expect volatility in equities to persist as worries over the ongoing trade war between the US and China and the US Federal Reserve raising interest rates have contributed to domestic fears about higher crude prices and a weaker rupee.

“Concerns on rising yields, politics, reducing global liquidity and crude prices will likely remain a key matter of concern,” said Macquarie in a client note. “Within India, we believe the global playbook will continue with high valuation stocks continuing to be under pressure with any signs of slower growth.”

To be sure, stocks rose in early Friday trade in the US over tensions with China appearing to ease.

Source: Economic Times