Sensex Ends 358 Points Higher; Metal and IT Stocks Witness Buying

Wed, 6 Feb Closing

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Indian share markets continued their momentum during closing hours and ended the day on a strong note. Gains were largely seen in the metal sector and IT sector.

At the closing bell, the BSE Sensex stood higher by 358 points (up 1%) and the NSE Nifty closed higher by 128 points (up 1.2%). The BSE Mid Cap index closed down by 0.1%, while the BSE Small Cap index ended the day up by 0.1%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood flat and the Nikkei was trading up by 0.1%.

European markets were trading on a negative note. The FTSE 100 was down by 0.1%. The DAX was trading down by 0.5%, while the CAC 40 was down by 0.2%.

The rupee was trading at 71.53 to the US$ at the time of writing.

The rupee witnessed selling pressure today ahead of the Reserve Bank of India (RBI) policy statement that will be released tomorrow.

Market participants are expecting that the central bank could consider cutting rates by 25 basis points (bps). However, any change in the stance could trigger further volatility for the Indian rupee.

This will be RBI governor's first policy meeting and a dovish stance could put the currency under pressure.

In its December monetary policy review, the RBI had kept interest rates unchanged but held out a promise to cut them if the upside risks to the inflation do not materialise.

As per a leading financial daily, S&P Global Ratings said that falling inflation and declining global crude oil prices have created space for the Reserve Bank of India (RBI) to cut interest rates.

As per the news, S&P Global Ratings Economist Vishrut Rana said inflation remains under control and near the low end of the target band, following strong food output, and easing crude oil prices.

The above announcement comes ahead of the sixth bi-monthly policy review for the fiscal that the RBI is set to announce tomorrow.

Speaking of inflation, note that in 2016, the RBI adopted an inflation target of 4% (+/-2%) for next five years under the monetary policy framework.

However, since August last year, inflation has stayed below RBI's target of 4%. This is evidemt in the chart below:

Actual Inflation has Stayed Below the RBI's Target

Here's what Sarvajeet Bodas wrote about this in today's edition of The 5 Minute WrapUp...

• In fact, in December, CPI-based retail inflation declined to an 18-month low of 2.2%.
  
  Currently, the RBI's policy stance was 'calibrated tightening'.
  
  But with the recent inflation data, the MPC may change its monetary stance to 'neutral', even if it does not cut the repo rate.

HUDCO share price was in focus today as the company announced that it has raised funds of Rs 20.7 billion through issue of Government of India Fully Serviced, Unsecured, Taxable HUDCO Bonds Series -III 2018.

The proceeds will be utilized for lending to Building Materials and Technology Promotion Council (BMTPC).

From the banking sector, SBI share price was also in focus today as the state-run lender signed a memorandum of understanding (MoU) with MG Motor India to provide wholesale inventory finance to MG Motor dealers through bank's technologically-advanced electronic lending product.

To know more about the financials of the bank, you can read SBI's latest Result Analysis and SBI annual report on our website.

In the news from the IPO space, Engineering systems and solutions provider Uniparts India has received market regulators go ahead to float an initial public offering (IPO).

As per the draft papers, Uniparts India's IPO comprises fresh issuance of shares worth Rs 1 billion, besides an offer for sale of 1,30,60,770 shares by existing shareholders.

Funds raised through the issue will be utilised towards repayment of the outstanding loan facilities availed by the company and for general corporate purposes.

Earlier, Uniparts had filed initial papers with the markets regulator in September 2014 and also obtained the regulator's clearance to launch the IPO but did not go ahead with the initial share sale.

Speaking of IPO's, according to an article in The Economic Times, Indian stock exchanges ranked second globally in terms of IPOs, raising US$ 5.52 billion from 161 offerings till November this year. The US ranked first, raising US$ 60 billion from 261 IPOs.

Here's an excerpt from the article:

• According to the report, the drop in IPOs could be attributed to reasons such as significant corrections in the stock markets in mid-cap and small-cap stocks.
  
  Further, the amount of volatility has increased due to uncertainties around global growth compounded by the ongoing US-China trade wars.
  
  In addition, there are a number of macroeconomic factors which are contributing uncertainties such as liquidity crises among non-bank lenders in India triggered by defaults done by a leading infrastructure finance company IL&FS and currency volatility (depreciation of the rupee), the report added.
  
  With so many IPOs set to hit the markets, we at Equitymaster believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs.
  
  If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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