US data does the job for India

By: | Published: October 6, 2015 12:14 AM

Markets rise globally amid fresh hopes of delayed rate hike by US Fed

Indian equities on Monday joined the rally in Asian and European shares as investors took solace from a poor US jobs data on Friday that now reduces the odds of an interest rate hike by the US Federal Reserve. Even industrial commodities like crude oil and copper rose more than 1% each.

The Sensex surged to a six-week high on Monday and recorded its second-biggest gain of 2015. The gauge of top 30-companies advanced 564.60 points, or 2.15%, to close at 26785.55. The Nifty gained 2.1%, or 168.40 points ,to settle at 8,119.30. The positive mood was also witnessed in broader markets with the Mid- and Small-cap indices gaining nearly 2% each on bargain buying and short covering.

Foreign portfolio investors (FPIs) were net buyers in the cash segment of $100 million (Rs 650 crore), showed provisional data on stock exchanges. Their domestic counterpart also lent support, with data showing stock purchases worth Rs 365 crore.

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Major indices in Asia closed the day with 1-4% gains each, led by Hang Seng, while European stock markets were in a buoyant mood despite economic data indicating a slowdown in the service sector. UK’s FTSE 100 index was the best performer with 3.7% at the time of going to print. France’s CAC index rose more than 2% following the news that its services firms actually caught up (a little) with the rest of the eurozone last month.

The Stoxx Europe 600 Index rose a second day, and US equity-index futures climbed after Friday’s worse-than-forecast jobs data. The MSCI Asia Pacific Index headed for its longest streak of gains since July.

The odds of Fed liftoff this month fell to 8% after US reports showed the pace of hiring slowed in September and wage growth stalled, spurring speculation policy makers will take longer to remove stimulus that has helped repair the global economy.

“The US jobs data for September push a rate hike further into the future and give more steam to the market to go higher, following a larger-than-expected rate cut by RBI last week,” said Ravi Shenoy, assistant vice-president, Motilal Oswal Securities.

Market breadth was strong and all sectoral indices ended positive. Twenty six out of 30 Sensex companies ended in the green. Overall, 2,001 stocks advanced compared with 792 stocks that ended in the red. Capital goods and banking shares were among the top gainers. HDFC, the top mortgage lender, rose for the first time in three days. ICICI Bank, the largest private-sector lender, had the steepest climb in five months and lifted the gauge of banking stocks to over 3%.

Analysts said the rally in banking stocks was triggered last week after RBI cut key refinancing rate by 50 bps to boost festive season demand from consumers. Transmission of the rate cut has started with most banks cutting rates by 25 bps. “In the immediate term, EMs will be on a positive note and India is likely to be among the strong beneficiary of the risk-on mode,” said Vinod Nair, head, fundamental research, Geojit BNP Paribas Financial Services.

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