The equity markets ended in the green after hitting record highs in a post-budget euphoria this week. While the budget was indeed a big hit with the equity markets and a repo rate cut by the RBI pushed to propel indices higher, profit booking reigned in the gains. The 30 scrip S & PBSE Sensex closed the week at 29,448.95 points, a gain of about 87.45 points over last week’s closing. The 50 scrip NSE CNX Nifty also closed the week in green at 8,937.75 points. The indices touched record highs this week (Sensex hit 30,024.74 and Nifty peaked at 9,119.20). Investor preference certainly leaned towards mid and small cap indices this week. The CNX Midcap Index was up about 1.8 percent while the BSE Small Cap also rose about 1.7 percent this week.
Experts, however, suggest that there may be some short-term volatility and retail investors may do best by investing with the long-term in view. With the major economic events such as the union budget out of the way, there may be some profit booking in the weeks to come. The week has seen many market watchers and experts come out in open appreciation of the macroeconomic changes initiated by the NDA administration. Citigroup suggested that the reforms that the government is committed to implementing may send the Sensex over 33,000 by December this year. The markets remained closed on Friday for Holi.
Sun Pharma (gain of 14 percent), Cipla (gain of 8.4 percent), Lupin (gain of 5.2 percent), HDFC (gain of 4.5 percent), BPCL (gain of 4 percent), L&T (gain of 3.3 percent), and HUL (gain of 3.3 percent) were the top gainers at the Nifty while Tata Motors, ITC, Mahindra & Mahindra, Cairn, JSPL, Coal India, and NMDC were among the top losers.
RBI Cuts Repo by 25 bps
The inflation rates have been showing a steady decline due to the socio-economic reforms put forward by the government of India. Buoyed by the fiscal consolidation that is on the cards, India’s central bank, the RBI announced a 0.25 percent (25 bps) cut in the repo rate. The RBI Governor, Raghuram Rajan announced that the bank had decided to “reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.75 per cent to 7.5 percent with immediate effect”. This now means that individual and corporate borrowers will be relieved if the commercial banks pass on the benefits to their customers.
Repo rate is the rate at which the commercial banks pay interest to the RBI for any money borrowed. Banks often borrow from the RBI for short durations – from a day to a fortnight – to make up of shortfall in funds. The rate that the RBI charges for this is the repo rate. A reduction in the repo rate is a sure way to promote growth in any economic environment. With inflation woes well under control, the finance ministry and the RBI are now gunning for growth.
Spectrum Auction Bids Reach INR 77,000 crore by Day III
Three entire days and 17 rounds of the spectrum auction saw some pretty exciting action as the government ended up with over INR 77,000 crore worth bids. “The bidding has taken place in all bands. At present, a value of approximately Rs 77,000 crore has been committed by bidders in respect of provisionally won spectrum. There is still spectrum, which is yet to be sold”, said a Department of Telecom statement. Bidding, is likely to, would recommence and close on Saturday. The finalization of the bids is up to the Supreme Court of India. There are about 8 bidders in the running and the government is hoping to raise about INR 82,000 crore from the auction. Apart from the 2G spectrum put for auction – 103.75 MHz in 800 MHz band, 177.8 MHz in 900 MHz band and 99.2 MHz in 1,800 MHz band – there is also a 3G spectrum up for grabs – the 5 MHz in 2,100 band.
GST Roll Out Announcement Keeps Expectations High
With the Finance Minister Arun Jaitley announcing the roll out of the Goods and Services Tax (GST) in April 2016, economists and the markets in general are rife with expectations of a uniform taxation system across the country and for smoother, more efficient business systems. The government announced that all the states are “on board” and the administration is in the process of fine tuning the processes. The Minister of State for Finance, Jayant Sinha said that the roll out of the GST is likely to be a revolutionary measure and will transform the “fiscal architecture” of the country. He likened it to the blooming of the private sector in 1991.