Rate cut hopes fuels rally in Sensex; trade tensions limit gains

It was a stable Tuesday ahead of the outcome of the RBI’s Monetary Policy Committee on August 7, but the Street gave up gains in the last hour of the trade. The S&P BSE Sensex, which was up 540 points, failed to hold on to gains and closed below 37,000.

The Nifty50 also failed to hold onto 11,000 levels as concerns over the US-China trade war, currency woes, and outflows from foreign investors’ capped gains.

The final tally on D-Street: the S&P BSE Sensex rose 277 points to 36,976, while the Nifty50 closed 85 points higher at 10,948 on August 6.

“Going forward, we expect volatility to remain high in the near term and maintain our cautious stance on Indian markets. Given the comforting inflation data and declining growth, expectations are rife for a fourth consecutive rate cut of 25bps by RBI in its policy meet on August 7, 2019,” Ajit Mishra, VP, Research, Religare Broking Ltd, told .

“However, the commentary on growth and inflation would be a more important factor in deciding the course of the markets. On the global front, escalating trade tensions between the US and China will keep market participants on the edge and cause volatility in oil prices as well as currency,” he said.

Sectorally, the S&P BSE Capital Goods index rose 2 percent, followed by the S&P BSE Telecom index that gained 1.9 percent. The S&P BSE Realty index was up 1.7 percent.

The broader markets outperformed the benchmark, with BSE Midcap and BSE Smallcap ending with gains of 1.4 percent and 1.7 percent, respectively.

Top Nifty50 gainers include Bajaj Finance, Tech Mahindra, and YES Bank, which gained 3-5%. On the losing front, RIL, TCS, and Power Grid lost over 1 percent each.

Stocks in news

Shares of Dewan Housing Finance Corporation surged 32 percent after the company, through a resolution plan, assured lenders of no haircuts on debt.

Shares of Amber Enterprises rose 5 percent after SPA Securities initiated coverage on the stock with a buy call.

Indian Bank shares rallied 4 percent after lower provisions and other income lifted June quarter profitability 75 percent year-on-year, but slippages remain elevated on a sequential basis.

Berger Paints touched a 52-week high of Rs 350, rising 3 percent after the company reported robust numbers for the June quarter.

Shares of SRF rose nearly 16 percent after the company posted strong numbers for Q1.

Global updates

Uncertainty over the US-China trade deal dragged the Asians markets down yet again.

Shanghai Composite shed 1.56% at 2,777.56, Nikkei was down 0.65% at 20,585.31, and Kospi fell 1.51% at 1,917.50.

However, the European markets were trading higher as new industrial orders increased by 2.5% in the month of June (MoM).Subscribe to Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.