1. Sensex, Nifty not impressed by lowest inflation in five and a half years, investors await Fed rate decision

Sensex, Nifty not impressed by lowest inflation in five and a half years, investors await Fed rate decision

Indian benchmark indices opened flat today as investors watch US Federal Reserve's two-day rate-setting meeting which will begin later tonight, even as numbers released yesterday show that India's consumer inflation dipped to a five-year low in May.

By: | Updated: June 13, 2017 10:10 AM
At 9:25 am, BSE Sensex was trading 71.54 points or 0.23% higher at 31,167.24 points while the NSE Nifty was up 19.80 points or 0.21% at 9,636.20 points. (Image: PTI)

Indian benchmark indices opened flat today as investors watch US Federal Reserve’s two-day rate-setting meeting which will begin later tonight, even as numbers released yesterday show that India’s consumer inflation dipped to a five-year low in May while April IIP growth slipped to a disappointing 3.1 percent, raising hopes that the Reserve Bank of India may cut interest rates to boost the struggling industrial sector.

BSE Sensex opened 4.60 points or 0.01% lower at 31,091.10 points, while NSE Nifty, the broader gauge, opened 0.85 points or 0.01% lower at 9,615.55 points. At 9:25 am, BSE Sensex was trading 71.54 points or 0.23% higher at 31,167.24 points while the NSE Nifty was up 19.80 points or 0.21% at 9,636.20 points.

While the US Federal Reserve is widely expected to hike the policy rate this time, markets will also keenly watch its communication on US economic growth and future rate hike trajectory. More importantly, it remains to be seen when Fed Chairman Yellen and other policymakers on penal will look at downsizing the Fed balance sheet.

India’s retail inflation eased to the lowest level in five and a half years in May on account of dropping food prices, bolstering hopes for an interest rate cut by the Reserve Bank of India (RBI) later this year. Consumer prices rose by an annual 2.18 percent last month, compared with a 2.99 percent gain in April. However, industrial growth was at 3.1 percent in April, well below the revised 3.8 percent figure for March.

IIP growth at 3.1 percent “in the first month of FY18 is not very encouraging,” said Sunil Kumar Sinha, principal economist, India Ratings and Research, attributing it to the “lagged effect of demonetisation which may play out even in the first quarter of FY18.”

Asian markets were trading higher today. MSCI’s broadest index of Asia-Pacific shares outside Japan rose percent in early trade, reported Reuters. Japan’s Nikkei slipped 0.3 percent. South Korea’s KOSPI gained 0.3 percent, with the biggest stock Samsung Electronics flat after Monday’s 1.6 percent fall.

The US market closed flat on Monday weighed down by fall in technology shares. The S&P technology sector fell 0.8 percent after dropping 2.7 percent Friday for its largest two-day decline in nearly a year. The Dow Jones Industrial Average fell 36.3 points, or 0.17 percent, to 21,235.67, the S&P 500 lost 2.38 points, or 0.10 percent, to 2,429.39 and the Nasdaq Composite dropped 32.45 points, or 0.52 percent, to 6,175.47.

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Mizuho Securities cut its rating on Apple to “neutral” from “buy” on Monday, saying the stock had outperformed this year and that the “upcoming product cycle is fully captured at current levels.” Apple shares, down 2.4 percent on Monday, are up about 26 percent so far in 2017, said a Reuters report.

The Indian Rupee opened unchanged at 64.44 against the US Dollar. The local currency on Monday weakened by 20 paise to settle at a one-week low against the US currency.

Oil edged up on Monday on signs of inventory declines in the United States and news that Saudi Arabia will limit volumes of crude to some Asian buyers in July and deepen cuts to the United States, said a Reuters report. Brent crude futures ended the session up 14 cents or 0.3 percent at $48.29 a barrel, while US West Texas Intermediate (WTI) crude futures gained 25 cents or 0.6 percent, to settle at $ 46.08.

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