Caution over monetary policy review dents markets

Mumbai: Caution over the upcoming monetary policy review, coupled with negative global indices and a weak rupee dented the Indian equity markets on Monday.

This led to a barometer index of the Indian equity markets to provisionally close the day’s trade on a flat-to-negative note — down 46 points.

Initially, both the Indian bellwether indices of the Indian equity markets opened on a positive note, following their steep rise on last Friday.

However, sentiments were soon subdued due to negative Asian markets, selling pressure in the banking sector and a weak rupee.

Investors were seen cautious ahead of the Reserve Bank of India’s (RBI) upcoming monetary policy review.

The RBI is expected to conduct its sixth and final bi-monthly monetary policy review on February 2.

Besides, a weak rupee unnerved investors. It weakened to 67.81 against a US dollar from its previous close of 67.78 to a greenback during the intra-day trade.

The weakness in the rupee value indicates the massive outflow of foreign funds from the Indian equity and debt markets.

During 2016, FPIs (Foreign Portfolio Investors) have been major net sellers in every trading session. In total, FPIs have sold equities worth Rs.13,966 crore during January.

“Rupee yo-yoed against the US dollar, thanks to the see-saw moves in domestic bond and equity markets. The BoJ’s (Bank of Japan) lead risk-on failed to carry markets through today, as risk of competitive devaluations from other Asian countries, like China, has increased,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

“Rupee too weakened from the day’s high of 67.64 to 67.81 levels on spot, around the levels, where it had closed on last Friday. Demand for US Dollars from importers at lower levels is now supporting the pair.”

Even the flat-to-negative European indices disappointed the Indian equity markets.

In addition, investors seem to have ignored positives such as a rising PMI (Purchasing Managers index) for January and a firm crude oil prices around $33 to a barrel.

The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) closed lower by 46 points, or 0.18 percent.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) ended the day’s trade flat. It inched down by 14 points, or 0.18 percent, at 7,550.05 points.

The S&P BSE Sensex, which opened at 24,982.22 points, provisionally closed at 24,824.83 points (at 3.30 p.m.) — 45.86 points or 0.18 percent from the previous day’s close at 24,870.69 points.

It touched a high of 25,002.32 points and a low of 24,788.58 points during the intra-day trade.

The S&P BSE market breadth was flat, though it marginally favoured the bulls — with 1,425 advances and 1,265 declines.

“Caution over RBI’s monetary policy review and a weak rupee subdued investors’ risk-taking appetite. Negative Asian markets and flat-to-negative European indices, too, dented sentiments,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.