Easing inflation numbers for May act as a trigger

Stock indices rebounded on Friday on hopes of a rate cut by the Reserve Bank of India (RBI) following an easing in the wholesale price index (WPI) numbers announced by the Government.

The Bombay Stock Exchange (BSE) 30-share sensitive index (Sensex) gained 350.77 points.

While all sectoral indices made smart gains, the lead went to consumer durables with 3.52 per cent gains, followed by automobile at 3.01 per cent, realty at 2.86 per cent, metals at 2.50 per cent and capital goods at 2.37 per cent.

The National Stock Exchange’s Nifty ended higher by 109.30 points to finish at 5808.40.

After four days of successive decline, Nifty surged almost vertically on Friday and partially trimmed its weekly loss.

On similar lines, the Sensex rebounded past its psychological 19,000 mark.

“The rebound was triggered on the back of an easing in inflation numbers for the month of May, which in turn persuaded expectations of a further rate cut by the central bank at its mid-quarter monetary policy review on June 17,” said Ajit Mishra, Assistant Vice-President-Equity Retail Research, Religare Securities Ltd.

Rupee gains

Meanwhile, the rupee gained against the dollar on Friday as exporters sold a huge amount of the dollar in the foreign exchange market.

The rupee closed at 57.51/52 per dollar as compared to its previous close of 57.98/99.

In the last few days the central bank has taken several measures to prompt exporters to bring their funds to the country.

“The recent slide in the rupee has raised eyebrows on all fronts,” said rating agency Crisil in a report. A sharp depreciation can adversely impact inflation.

“We believe that the current slide will be temporary and that the rupee will strengthen from current lows.

“However, it will be interesting to see how inflation will behave if the rupee ends 2013-14 at 57 to a dollar, against our current expectations of 54 to a dollar.”

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