A potentially positive development in Syria and better-than-expected trade data bolster sentiment

Efforts to avert an invasion on Syria by the Unites States and its allies bolstered positive sentiment on the financial markets globally, which, consequently, helped the rupee rebound further against the dollar to 63.84.

The S&P BSE Sensex zoomed more than 700 points to close just below the psychological 20000-mark.

The Sensex closed at 19997.09, as it shot up by 727.03 points or 3.77 per cent with the automobile stocks surging 5.98 per cent, followed by capital goods 5.50 per cent, fast-moving consumer goods 5.30 per cent, consumer durables 4.80 per cent and power 3.04 per cent. All secoral stocks gained handsomely.

The Sensex touched an intra-day high of 20012.69.

The rupee shot up by 140 paise to close at 63.84 a dollar on Tuesday compared to 65.24 last Friday.

“The sentiment for the rupee turned positive essentially because of dollar sales by custodial banks. The recent measures taken by the Reserve Bank of India (RBI) relating to Foreign Currency Non-Resident (Bank) deposits and bank borrowing also improved the sentiment. The equity market also turned very positive, which supported the dollar-rupee movement,” said N. S. Venkatesh, Treasury, Chief General Manager, IDBI Bank.

Banks can borrow overseas funds up to 100 per cent of their unimpaired Tier-1 capital against the earlier limit of 50 per cent.

“The expectation is that the rupee will strengthen with a near-term view of 60-61 a dollar,” Mr. Venkatesh added.

On the National Stock Exchange (NSE), the 50-share Nifty shot up by 216.35 points or 3.81 per cent to close at 5896.75.

“A potentially positive development in Syria, continued strengthening of the rupee against the dollar, and better-than-expected trade data saw the Nifty close at the highest level since July 25.

“Market participants were relieved after U.S. President Barak Obama said that if Syria did turn over its chemical weapons, that could “absolutely” result in putting a military strike on hold,” said Amar Ambani, Head of Research, India Infoline.

The rupee rose to a two-week high continuing its recent recovery trend from record lows hit last month.

“Hopes that Raghuram Rajan will unveil more market-friendly measures, which were further boosted after the RBI, late on Friday, made it easier for non-residents to buy shares of listed companies,” said Mr. Ambani.

Another sentiment booster was better-than-expected August trade deficit numbers. Merchandise exports grew by around 13 per cent at $26.14 billion last month compared to $23.13 billion in the same month a year ago.

G-Sec yield

Meanwhile, the yield of 10-year Government Securities (G-Sec) has come down to 8.47 per cent.

“We continue to remain constructively positive at the longer end of the yield curve, and believe that as RBI starts calibrating the measures done in the recent past and we will continue to see softening impact across the yield curve. The 10-year yield right now is trading at about 8.4 per cent,” said Lakshmi Iyer, Head of Fixed Income & Products at Kotak Mutual Fund.


Finally, some good fiscal newsSeptember 10, 2013

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