Indian markets trimmed their early gains and were trading flat at the pre-close session on Monday as higher inflation reduced the chances of any rate cut by the Reserve Bank of India in its monetary policy review this week.
Costlier onion and other vegetables have pushed WPI inflation up 6.1 per cent in August against 5.79 per cent in July.
At 3.17 p.m., the Sensex was quoting at 19,739.13, up 6.37 points or 0.03 per cent and the Nifty was quoting at 5,835.05, down 15.55 points or 0.27 per cent.
Healthcare, realty, IT and TECk indices succumbed to heavy selling pressure and were down 2.64 per cent, 2.11 per cent, 1.88 per cent and 1.27 per cent, respectively. Banking, FMCG, auto and PSU indices remained investors' favourite and were up 1.82 per cent, 0.34 per cent, 0.32 per cent and 0.07 per cent, respectively.
ICICI Bank, Maruti, Bharti Airtel, HDFC Bank and Hero MotoCorp were the top five Sensex gainers, while the top five losers were BHEL, Sesa Goa, TCS, Tata Power and Cipla.
Domestic sentiment was propped up in the early trade on heavy FII inflows after SEBI allowed FIIs to invest in government securities without any auction mechanism to boost foreign fund inflows into the capital markets.
At the global front, decreasing chances of US action on Syria resulted in falling crude prices and with this Asian markets rallied sharply.
Added to this, was an expectation that the US Fed would not taper its bond buying programme as fast as it had indicated and this could prompt a rate cut in India. The Nifty opened with a gap up of 79 points at 5,930, while the Sensex opened at 19,977, up 244 points.
Credit Suisse in its India Market Strategy said: “The earnings season will have surprises: mispriced import and export hedges or complex currency derivatives are likely to get exposed. We now have more evidence (from RBI's September bulletin) that the recent precipitous fall in the rupee was caused only by a crisis of confidence and estimate ~US$13 bn exited in just July and August through panicking corporates hedging themselves.Given that the fear trade drove the decline, it is quite likely that the following appreciation may be as sharp. Even if the RBI tries to reduce volatility and starts to build reserves at the rupee dollar exchange rate of 60, currency volatility is already the highest ever seen, it added.”
European stocks were up after Lawrence Summers withdrew from consideration as Federal Reserve Chairman, paving the way for Janet Yellen, who investors say will favor a slower reduction of stimulus. US index futures and Asian shares also rose.
Crude oil prices were down after the US and Russia agreed on a plan to eliminate Syria’s chemical weapons.
Stoxx 50 rose 33.51 points or 1.17 per cent to 2,900.62, FTSE 100 climbed 65.43 points or 0.99 per cent to 6,649.23 and DAX jumped 112.60 points or 1.32 per cent to 8,622.02.
In the Asian trade, Japan's Nikkei was up 17.40 points or 0.12 per cent at 14,404.70, Hong Kong's Hang Seng jumped 282.16 points or 1.23 per cent to 23,197.40 and Australia's S&P/ASX 200 climbed 28.37 points or 0.54 per cent to 5,248.
The European benchmarks FTSE100 was marginally down, while CAC40 and DAX were near flat.
Investors are closely watching the minutes of the US Federal Reserve meeting scheduled for Wednesday and Thursday. The Federal Open Market Committee meeting is important, especially for emerging markets such as India, because it would provide some definitive clue on the timing and downsizing of the Fed’s bond-purchase programme — commonly known as quantitative easing programme.
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