On one hand, the RBI will have to initiate measures to contain inflow of foreign capital -- which is expected to increase as an after effect of the Fed rate cut, on the other it will need to ensure that such inflows do not fuel inflationary pressures.
Gold prices tumbled by Rs 3,350 to Rs 72,300 per 10 grams in the local market in New Delhi on Tuesday amid subdued demand by jewellers after the government announced the customs duty cut on the yellow metal and silver to 6 per cent.
The deficit data was the latest in a run of positive signs for the sluggish domestic economy and could put India in a better position should the Fed start tapering, than in the summer when the rupee hit a record low.
Though the Reserve Bank would want to keep excess liquidity under check to contain inflation, it may still go for a CRR cut to enable banks lower interest rates in order to spur growth through increased credit offtake.
Among the Sensex firms, Asian Paints, Tata Steel, HCL Technologies, Nestle, Maruti, JSW Steel, NTPC and Larsen & Toubro were the major laggards. Sun Pharma, Bajaj Finserv, Reliance Industries, State Bank of India and Bharti Airtel were the gainers.
In the Sensex pack, 20 stocks ended in the red while 37 of the Nifty constituents closed the session with losses. NTPC was the biggest loser among the Sensex constituents, ending with a loss of 2.71 per cent.
The US Federal Reserve, on Wednesday, announced a 0.25 per cent cut in benchmark interest rate, which is expected to increase capital flow from foreign institutional investors in the Indian stock market.
Index heavyweights Reliance Industries and ITC were the top losers along with ICICI Bank and SBI
The rupee is expected to become more jittery and choppy in the near-term
Federal Reserve Chair Janet Yellen on Wednesday pointed to a possible December interest rate "liftoff" but said rates would rise only slowly from then on to nurture the U.S. economic recovery.
Indian government bonds, particularly those of shorter maturity, strengthened sharply on Monday, as the collapse of the California-based Silicon Valley Bank (SVB) prompted investors to rush to the safety of American debt, leading to a decline in US bond yields.
There are already some signs of stress in this market.
Rupee ends flat against dollar ahead of Fed policy outcome.
Kerala pumpkin curry has to be the best way to eat kadu. And ever tried an imli-ginger relish?
Month-end dollar demand from oil companies mainly affected the rupee value against the US currency, a forex dealer said.
64% of 800 investors polled think it will start this week but weak US data suggest it might not be aggressive.
The US Federal Reserve on Wednesday surprised the markets by saying it will continue with its monthly $85-billion bond buying programme and wait for more evidence of growth recovery.
Some investors had speculated that the US central bank might put its plans on hold given the jitters overseas.
Among the Sensex firms, IndusInd Bank, Tata Steel, Tata Motors, Sun Pharma, Infosys, Mahindra & Mahindra, Infosys, NTPC, Bharti Airtel, HCL Technologies and Axis Bank were the biggest gainers. Tech Mahindra and Bajaj Finance were the laggards.
Global trends, macroeconomic data, and the outcome of the US Fed policy meeting are the major factors that will drive the movement in the domestic equity markets this week, analysts said. "In the upcoming data-centric week, the focus will be on crucial releases, including inflation data from India and the US. "Indian inflation is expected to rise, while US inflation will remain steady.
It is surprising that central bankers around the world have cautioned the US Federal Reserve against raising rates.
It wants to wait for more evidence of solid economic growth before making any changes.
India builds up record FX after Fed hints rate hike in future.
The Indian stock markets' buoyant reaction to US Fed's decision to halt the interest rate hikes seems to reflect the growing clout of FIIs on the domestic bourses, which were falling like ninepins not long time back.\n
Top gainers in the Sensex pack included Vedanta, Coal India, ICICI Bank, PowerGrid, HCL Tech and Bajaj Finance, rising up to 2.65 per cent.
The Indian economy is likely to grow at over 7 per cent in the current fiscal year, former Niti Aayog vice chairman Arvind Panagariya said on Wednesday, while observing that the growth rate should sustain next year too provided the forthcoming Budget does not have any negative surprises. Panagariya further said recessionary fears have been around for a while but so far neither the US nor the EU has gone into recession. "From the viewpoint of India, in terms of headwinds originating abroad, the worst is probably behind us," he told PTI.
The Indian financial system is driven more by the domestic factors and "Fed rate cut is one of the triggers to review rates ", said Union Bank Bank of India chairman M V Nair.
Of the eight RBI governors who have held office since the 1991 economic liberalisation, Bimal Jalan had the longest stint and S Venkitaramanan, the shortest. Current Governor Shaktikanta Das will overtake Bimal Jalan before completing his second term in December, points out Tamal Bandyopadhyay.
Gold is an excellent asset class for diversification and should be included in all long-term portfolios.
At the same time, however, officials at the central bank lowered their projections for the long-run target interest rate, evidence of slightly diminished expectations for a nation climbing out of a severe crisis and struggling with demographic headwinds like declining labor force participation.
Dollar's strength and falling crude oil prices force downward revision of 2015 growth forecast.
The broader NSE Nifty dropped by 48.65 points, or 0.45 per cent to 10,808.05 after shuttling between 10,773.55 and 10,833.70.
The 30-share Sensex closed down 114 points at 28,622 and the 50-share Nifty ended down 37 points at 8,686.
Modi, on his maiden visit to the UNESCO World Heritage Site, first took the elephant safari in Mihimukh area of the Central Kohora Range of the park followed by the jeep safari inside the same range.
Rate-sensitive sectors like banks, auto and realty witnessed strong buying demand in trades today
India's prices are rising faster than many of its emerging market peers. The country's inflation print for May at 4.25 per cent is a marked reduction from the levels seen in May 2022 (7.04 per cent). However, even though the inflation rate remains within the Reserve Bank of India's medium-term target of 4 per cent, with a 2 per cent margin on either side, it continues to be higher than China, Russia, and Brazil.
Market breadth continued to remain strong, with 1899 gainers and 674 losers on the BSEs.
Indian stock markets are expected to be driven mostly by global factors this week amid a lack of local triggers and earnings season largely coming to an end, say analysts. Crude oil prices, rupee movement and US Federal Reserve meeting minutes to be released this week will also influence the market sentiment. "With the earnings season behind us, global cues would largely dictate the trend in the coming week," Ajit Mishra, SVP - technical research, Religare Broking Ltd, said.
In the offshore non-deliverable forwards, the one-month contract was at 61.56/66, while the three-month contract was at 62.16/26.
