Benchmark equity indices posted their biggest weekly gain in two months fuelled by an “unexpected” rate cut by the Reserve Bank of India (RBI), indicating India is moving into a pro-growth monetary policy cycle.
RBI’s decision to cut the key policy rate by 25 basis points and hint that it could do more, saw the Sensex post their biggest single day jump in eight months and foreign portfolio investors (FPIs) turning net buyers in Indian equities. Overseas funds bought $180 million on Friday showed provisional data on the stock exchanges, taking the weekly inflows to $530 million. After early bouts of selling, year-to-date flows turned positive to $140 million in CY15 – the sixth highest among markets tracked by Bloomberg.
The Sensex advanced for the third straight session on Friday, taking the weekly gain to 2.4%, the most in more than two months, to close above the crucial psychological level of 28000. The index changed directions at least 12 times amid a slide in Asian stocks after the Swiss National Bank’s decision Thursday to abandon the franc’s cap against the euro.
The Nifty rose 2.8% during the week to sustain a close above 8500. The rupee closed at a one-month high of 61.8713 per dollar. Indian equities are the second-best performing market in Asia after China.
Raamdeo Agrawal, joint-MD of Motilal Oswal Finance Services said the rate cut by the central bank was long due given the inflation data in global economies. “Consistent inflows of funds by foreign and domestic institutions will keep our markets buoyant. My sense is that now people will come in with lot more vigour buying into equities,” Agrawal said in a television interview.
Broader markets trailed benchmark indices this week despite clinching multi-year highs on the bourses. BSE Mid-cap index surged to a new record while Small-cap index rose to its highest level in four years.
Barring metal and oil & gas, all sectoral indices ended in the green. Real estate, industrial and consumer companies featured among top gainers.
HUL increased to a record after gaining 9.1% this week. BHEL surged close to 8% this week followed by HDFC (7.3%), L&T (6.2%), and M&M (5.36%).
Hindalco (-10.68%) was the worst performing stock of the week. Other losers included Tata Steel (-4.17%) and Sesa Sterlite (-7%).
