Nifty closes above 5850; Fed tapering eyed, IT surges 2%

Moneycontrol Bureau

The market has seen consolidation for the fifth consecutive session Tuesday as investors are cautious ahead of the outcome of two-day FOMC meet ending September 18, and RBI policy announcement on September 20. It will be Raghuram Rajan's first monetary policy since he took over as governor of the apex bank early this month. The Nifty, which has been oscilating in the 50-60 point range since last Wednesday, closed at 5850.20, up 9.65 points from Monday's close while the Sensex gained 61.56 points at 19804.03. Conclusion of the two-day Federal Reserve meeting is the only buzz globally. Whether the Fed will kick start its tapering this month or postpone is the question. Economists globally believe monthly bond purchases may be reduced by about USD 5-15 billion from current USD 85 billion irrespective of economic data. According to Wilbur Ross of Wilbur Ross & Co, reducing bond buying by USD 5 billion per month over 17 months would get it (Fed) to zero net purchases at the end of the period. Meanwhile, Rohit Arora, Emerging Markets Research, Barclays expects the US Federal Reserve to taper by USD 15 billion and cautions that this could cause weakness in emerging market assets. For India, Fed tapering, however, will weaken the rupee, says Arora. Hence, he does not see the Reserve Bank of India (RBI) scaling back its liquidity tightening measures in the upcoming meeting on September 20. Experts believe the RBI policy is not going to be a non-event as there are whole set of expectations from Raghuram Rajan. Guidance given by the new RBI governor would hold a lot more importance than any change in existing measures, believes Arora. According to Sanjay Sinha of Citrus Advisors, expectations are that rates will be maintained, there could be additional steps related to forex market or containing gold imports. BSE IT index surged 2% followed by FMCG and Auto with 0.7 percent gains while financials, power and oil & gas closed lower. Wipro topped the buying list in the Sensex with 5.4 percent gains. Dr Reddys Labs rallied 3.7 percent after it received approval from USFDA for generic Vizada injection, used to treat anaemia. Among financials, HDFC, ICICI Bank and State Bank of India declined 0.7-1.2 percent while Sun Pharma and ONGC lost 2-3%. YES Bank gained 3 percent after the private sector lender raised USD 255 million through a dual currency multi-tenure loan. In the midcap space, gold loan financing companies like Manappuram and Muthoot Finance tumbled 5-8 percent on RBI’s new norms. As per the norms, the companies require appropriate infrastructure for storage of gold ornaments and RBI's permission to open over 1000 braches. The central bank also clarified how the price of gold is to be ascertained while calculating the loan-to-value. Meanwhile, the rupee closed at 63.37 against the US dollar, down 54 paise from previous close.