Sensex, Nifty hit record closing high on foreign fund inflows

Major Indian indices − Sensex and Nifty − closed at their highest-ever on Tuesday riding strong and sustained foreign fund inflows and bets of yet another rate cut over a near-normal monsoon forecast.

Both indices touched their all-time highs − Sensex at 39,364.34 and Nifty 11,810.95 − during the early trade and mostly held on to the gains throughout the day, led primarily by banking stocks, though closed slightly lower from the peaks.

The BSE Sensex advanced by 369.80 points or 0.95 per cent to 39,275.64 and the broader Nifty jumped 96.80 points or 0.83 per cent to 11,787.15.

“The sentiment got a fillip due to the near-normal monsoon forecast. The (Dalal) Street is also anticipating further rate cuts to reverse the economic slowdown and sensing a return of consumption demand post elections,” said Devang Mehta, Head - Equity Advisory, Centrum Wealth Management.

“The banks continue to have a lion’s share in the ongoing rally and the onus to lead the earnings for Nifty will lie with the private banks. With two good primary market listings in two days and an upbeat mood, all eyes are now on the ongoing fourth-quarter earnings season.” Jet Airways witnessed a steep decline and closed 7.62 per cent lower as the struggling-to-stay-afloat airline awaits operational funding from the lenders. However, Jet’s competitor like Indigo marched higher to end 7.35 per cent up.

SpiceJet also finished on a strong note, up 11.19 per cent after it informed the exchanges that it will induct five 90-seater Q400 Bombardier aircraft in the next 10 days.

IT major Wipro ended 2.45 per cent lower. It reported a 38 per cent rise in its year-on-year net profit for the fourth quarter of 2018-19.

Meanwhile, the rupeedecline 17 paise to 69.59 against the greenback in opening trade on Tuesday.Strengthening of the American currency in the overseas market weighed on the domestic currency, said dealers.

However, sustained foreign fund inflows and positive opening in domestic equities supported the rupee and restricted the fall.

A near normal monsoon forecast would provide “some comfort” to the Reserve Bank of India and may prompt it to cut policy rates in August, instead of the next policy meet scheduled in June, a report said on Tuesday.

The Kotak report said that the overall inflation is likely to remain comfortable and around RBI’s preferred 4 per cent mark but the central bank will watch out for uncertainties owing to elections and rising crude prices.

“We pencil in another 25 bps cut in repo rate in 1HFY20 (August rather than June) as the RBI watches out the uncertainties from elections, crude prices, monsoon, and factors in the FY2020 budget and GDP growth print,” a Kotak report said.

The report also noted that while it is premature to deduce the effect on food prices and production, a favorable mix of price increase and production level could alleviate the farm distress to some extent. Separately, prices of telecom services are likely to rise in the second half of the current financial year (2019-20), an Edelweiss report said on Tuesday.

The probability of price hike can be attributed to the fact that the penetration in mobile broadband services has increased significantly and is nearing a saturation point.

“We estimate telecom operators to raise prices in H2FY20 as mobile broadband subscriber penetration reaches 65 per cent,” said the report titled “Telecom-Daylight Again”.

“Typically, in a market characterised by low penetration of services, providers’ quest for market share to gain economies of scale drives down prices, fuelling price wars. However, as investment requirements mount and relative attractiveness of balance market wanes, weaker players consolidate and participants start favouring pricing over incremental market share.”

On Reliance Jio, the Edelweiss report said that after 10 quarters since its launch and achieving 30 per cent of the revenue market share (RMS), “it is important to pause and take stock where the company stands now versus its objectives”.

“We believe that after achieving one of its key goals -- 400 million subscribers in H2FY20 -- Reliance JIO (RJIO) will hike prices to improve return ratios,” it said, adding that, JIO’s management, during its launch, had stated that one of its target is to achieve 400 million subscribers.

Regarding Bharti Airtel, the report observed that, with a strong balance sheet and adequate network investments, it is well placed to capitalise on industry recovery.

On the merged entity of Vodafone Idea, it said: “Although Vodafone Idea has higher operating and financial leverage from India’s telecom industry revival, we maintain our cautious stance considering underwhelming capacity expansion plans and weak data volume traction.”

Indo-Asian News Service