Volatile markets put focus on RBI, reforms

INDEX WATCH Sensex gains for second week after govt defends reforms, investors eye rate cut by Reserve Bank

MUMBAI: The Sensex rose 118 points on Friday, its second straight weekly gain, after banking stocks gained on expectations of an interest rate cut following falling inflation, and the government’s reassurance on reforms.

The markets have been highly volatile in the last few trading sessions, mainly due to the slow pace of reforms, tepid fourthquarter ear nings and concerns surrounding minimum alternate tax — a kind of tax on capital gains by foreign investors. Analysts said interest rate cut by the Reserve Bank of India and passage of key reform bills would drive the markets ahead.

On Friday, the market mood was also boosted by the continued recovery in the rupee against the US dollar and gains in overseas markets.

The benchmark BSE index finally ended the day at 27,324, up 117.94 points, or 0.4%. The broader NSE Nifty rose 38.15 points, or 0.5%, to close at 8,262.35.

“Bargain hunting at lower levels helped markets gain about 1% for the week. Debt repayment by Greece eased related concerns, which also led to cooling of US bond yields,” said Dipen Shah, head of private client group research at Kotak Securities.

The Sensex rose 0.8% during the week.

Some public sector banks reporting lower bad loans also boosted sentiment, said Ravi Shenoy, assistant vice-president at Motilal Oswal

Of the 30 Sensex stocks, 16 ended with gains led by SBI (up 2.39%), HDFC (up 1.80%) and Bharti Airtel (up 1.80%).

Wholesale price index-based (WPI) inflation declined to -2.65% in April, while retail inflation fell to 4.87%. This, coupled with sluggish industrial output growth, has fuelled hopes in the market that the RBI would cut interest rates. Analysts were diappointed after the government failed to pass the GST (Goods and Services Tax) Bill and the Land Acquisition Bill in the budget session.

SBI will be in focus next week as it reports its fourth-quarter earnings on May 22. Tata Steel, DLF, Bajaj Auto and ITC will also report earnings next week.