Sensex, Nifty close at over 7-month high as Yellen quells fears, RBI maintains status quo

Mumbai: India’s benchmark indices jumped to their highest close in more than seven months on Tuesday, in line with gains in world equities, after Federal Reserve chair Janet Yellen reiterated her faith in US growth while indicating that interest rates won’t be prematurely raised.

Also on Tuesday, the Reserve Bank of India (RBI) left key interest rates unchanged at its bi-monthly monetary policy review, in line with market expectations, and said its monetary policy will remain accommodative.

The move came a day after Yellen quelled speculation that US interest rates will be raised in July.

On Monday night, Yellen reiterated her belief that the US economy still has forward momentum and that consumers could provide a significant step up in spending this quarter to propel overall growth.

Yellen was silent on the timing of the next rate increase, playing down a June move and raising doubts about July.

BSE’s market capitalization crossed the Rs.100-trillion on Tuesday for the first time since 1 January.

BSE’s 30-share Sensex closed 0.87%, or 232.22 points, higher at 27,009.67 points, its highest close since 28 October 2015, while National Stock Exchange’s 50-share Nifty climbed 0.80%, or 65.40 points, to close at 8,266.45 points, its highest closing level since 23 October 2015.

Earlier in the day, the Sensex rose as much as 1.14%, or 305.18 points, to 27,082.63, its highest level since 29 October, while Nifty traded as much as 1.14% higher or 93.90 points at 8294.95, its highest level since 26 October.

With the event risk of the RBI policy out of the way, the markets, which had opened higher gained further traction after the policy announcement, dealers said.

“There were no unexpected negative surprises in the policy, and with world markets trading higher and flows continuing, our market moved upwards post the policy announcement too,” said Rikesh Parikh, vice-president of equities at Motilal Oswal Financial Services Ltd.

A few dealers also indicated that there was possible large buying, specially in frontline stocks, post the policy announcement

Among sectoral indices, rate sensitives such as BSE Realty Index and BSE Bankex were the top gainers. They rose 1.70% and 1.63%, respectively on Tuesday.

“The RBI is in a wait-and-watch mode wanting further clarity on monsoons, global crude oil prices, macroeconomic and financial developments,” Crisil Research said in a note adding that it expects another 25 basis point (bps) cut in interest rates this fiscal year.

One basis point is one-hundredth of a percentage point.

“RBI’s policy stance remains accommodative, but before wielding the knife on interest rates, it will monitor the growth recovery, US fed action, monsoons, trend in food inflation and watch how the things unfold in the money market,” Crisil analysts said.

In Tuesday’s trade, top lender State Bank of India (SBI) advanced 5.40% and was the top gainer among Sensex stocks. Rival ICICI Bank Ltd followed with a 4.31% gain.