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Markets rebound as US Fed signals interest rate cut; Sensex rises 266 pts

Bloomberg & Sundar sethuraman/Mumbai 11 Jul 19 | 10:38 PM

The benchmark indices rebounded from their lowest close in nearly two months, tracking their regional peers.

This followed comments by US Federal Reserve Chairman Jerome Powell, who signalled willingness to lower interest rates.

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The Sensex rose 0.7 per cent, or 266 points, to 38,823.1, while the Nifty advanced 0.73 per cent, or 84 points to end at 11,583. The Nifty gained for the first time in five sessions.

“Rate cut hopes in the US have bolstered equities across the globe. The slide in 10-year yield and strength in rupee, despite a surge in oil prices, may ease investors’ concern over liquidity," said Vinod Nair, head of research, Geojit Financial Services.

Both the Sensex and Nifty had closed at their lowest level since May 17 on Wednesday, after correcting close to 4 per cent in the previous four trading sessions. The increase in taxes in the Union Budget is seen as a major reason for investors’ disappointment.

Earnings guidance from Indian companies will be closely monitored by investors, as economic growth slows. Infosys and IndusInd Bank are the next major firms to report their earnings, with results scheduled for Friday.

“The ongoing earnings season holds key for equities after the Budget. Market participants have entered the earnings season with very muted expectations," said Jagannadham Thunuguntla, head (research), Wealth, Centrum Broking. Inflation and factory data reports, due on the same day, may also influence investor sentiment.

Of the 19 sectoral indices of the BSE, as compiled by Bloomberg, 17 ended with gains, led by the auto and metal indices. Of the 31 Sensex components, 23 closed the session with gains, while 39 of the  Nifty stocks advanced.

Hero MotoCorp and Tata Motors were the top gainers among Sensex components, gaining 4.5 per cent and 3.6 per cent respectively.

Tech Mahindra lost the most at 1.4 per cent, followed by ICICI Bank, which fell 1 per cent. Softening bond yields— both globally as well as domestically — have supported the equity markets this year, according to experts.

The lower yields have helped offset poor earnings growth and sluggish economic headwinds.

However, some believe the upside could be capped from current levels.

“Further gains are expected to be limited, as the market seems to be in a high valuation trajectory," said Nair.

Earlier this week, Nomura had raised the Nifty target for March 2020 to 12,900.

The brokerage has re-rated the market, saying that the softening of bond yields and steps taken to tackle the crisis in the non-banking financial companies (NBFCs) sector will help valuations.

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Sensex

Company Price Gain (%)
Infosys779.457.20
Sun Pharma.Inds.422.403.61
Maruti Suzuki6,079.751.81
TCS2,145.201.77
Kotak Mah. Bank1,507.751.58

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