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Sensex trips 66 points: Market turns cautious ahead of RBI policy review

The barometer index, the S&P BSE Sensex fell 0.24 per cent to settle at 26,777.45. The Nifty 50 index fell 19.75 points or 0.24 per cent to settle at 8,201.05

By: ENS Economic Bureau | Mumbai |
June 7, 2016 1:20:26 am
An employee counts Indian currency notes at a cash counter inside a bank in Kolkata June 18, 2012. The Indian rupee gained in early trade on Monday as risk assets rallied after Greece elections gave a slim majority to pro-bailout parties, with the focus shifting to the central bank policy decision later in the day. REUTERS/Rupak De Chowdhuri (INDIA - Tags: BUSINESS) An employee counts Indian currency notes at a cash counter inside a bank in Kolkata June 18, 2012. The Indian rupee gained in early trade on Monday as risk assets rallied after Greece elections gave a slim majority to pro-bailout parties, with the focus shifting to the central bank policy decision later in the day. REUTERS/Rupak De Chowdhuri (INDIA – Tags: BUSINESS)

Snapping three days of gains, the Sensex edged lower by 65.58 points as caution prevailed a day before the Reserve Bank’s decision on policy rates and ahead of a number of global risk events this month, including a US Federal Reserve meeting. The rupee, on the other hand, firmed up by 28 paise to close at 3-week high of 66.97 on sustained selling of dollars by exporters on the back of strong foreign capital inflows.

The barometer index, the S&P BSE Sensex fell 0.24 per cent to settle at 26,777.45. The Nifty 50 index fell 19.75 points or 0.24 per cent to settle at 8,201.05. The RBI is widely expected to keep its benchmark repo rate unchanged at the monetary policy review on Tuesday as it awaits the transmission of its previous cuts to the repo rate.

The rupee had last ended at 66.97 per dollar on May 18, 2016. With this, the rupee has gained by 48 paise or 0.72 per cent in three trading days. Heavy capital inflows mainly boosted the rupee value against the dollar. Foreign portfolio investors (FPIs) bought shares worth a net Rs 1,585.01 crore last Friday, as per provisional data released by the stock exchanges.

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Jayant Manglik, president, Retail Distribution, Religare Securities, said, “markets ended marginally lower in a dull trading session on Monday as participants preferred to sit on sidelines ahead of the RBI policy meet. Mostly sectoral indices traded in line with index and ended on flat note; however, movement in midcap and small-cap saved the participants’ day.”

“Participants also remained a bit skittish ahead of the Reserve Bank monetary policy, tomorrow. While expectations of a rate action are low, one would like to focus on the governor’s commentary,” said Shreyash Devalkar, fund manager (Equities), BNP Paribas Mutual Fund.

Analysts said Friday’s US jobs data has suddenly raised the hopes of FOMC maintaining status quo, but increased potential for Brexit has global markets on a tentative footing. “The market traded in a range bound movement with a negative bias as cautious investors wait for the RBIs monetary policy. The RBI is likely to maintain status quo as the uncertainty over the FED rate hike decision is prevailing. On the other hand, the weak US employment data gives a pause on investor’s pessimism over a probable rate hike in the June meet. Indeed, market participants are keenly waiting for US Fed chair speech to get cues on the rate hike decision,” said Vinod Nair, head of Research, Geojit BNP Paribas Financial Services.

Among the sectoral indices on the BSE, the telecom index (down 1.97 per cent), consumer durables index (down 1.39 per cent), healthcare index (down 0.79 per cent), energy index (down 0.54 per cent), oil & gas index (down 0.54 per cent), teck index (down 0.54 per cent) and the IT index (down 0.33 per cent) underperformed the Sensex.

Overseas, the US dollar slumped against its major rivals in early Asian trade and was under pressure by dismal US payroll data last week, prompting investors to rule out the chance of a hike in US interest rates this month. Oil prices pushed higher today thanks to a softer dollar after last week’s well-below-forecast US jobs report, but the gains were limited as producers increased their rig count as the commodity held around the key $ 50 level.

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