Wednesday cheers for Indian markets

On a day when most Asian stock markets ended in the red, the Indian bourse stayed in the green zone for the second day on Wednesday. Tokyo, too, settled with gains. It was a satisfying day for the markets on the whole with the Indian rupee firming up against the American dollar and the yield on benchmark 10-year Government India bonding slipping below the psychological 6% level.

In India, the equity benchmark Sensex jumped 258 points amid sustained foreign fund inflows. The BSE Sensex index closed up nearly 260 points or 0.7% at 39,303.

All eyes are on the two-day policy meeting of the U.S. Federal Reserve. The policy-setters are largely expected to send out a favorable signal on injecting fresh stimulus into the economy in the coming months. Nearer home in India, the persisting border tensions between Delhi and Beijing keep pulling down the gains on the bourses. The rising virus cases are also having an impact on market sentiment. The Indian health authorities reported a single-day jump of over 90 thousand infections, bringing the total number of Coronavirus cases to above 5 million.

The trade deficit with China down

The trade deficit between India and China in April-June this fiscal year fell to $5.48 billion as compared to $13.1 billion in the same period last year, the Indian Parliament was informed on Wednesday. In a written reply, Commerce and Industry Minister Piyush Goyal said that the bilateral trade between the countries, too, dipped to $16.55 billion during the first three months of 2020-21 as against $21.42 billion in the same period last year.

"Government has consistently taken steps to balance our trade with China by increasing our exports to China and reducing our dependence on imports from China," he said.

In a separate reply, he said that about 550 tariff lines (or products) were under the restricted/prohibited category for imports under the Foreign Trade Policy at the moment. Imports of these products were restricted from all countries, including China, he added.

Sustained foreign fund flow

The 30-share BSE index ended 258.50 points or 0.66 per cent higher at 39,302.85. The NSE Nifty rose 82.75 points or 0.72 per cent to 11,604.55. Stock-specific action and sustained foreign fund inflows reportedly drove domestic equities higher, despite mixed cues from global markets ahead of the US Fed outcome. Foreign institutional investors bought equities worth Rs 1,170.89 crore on a net basis on Tuesday, according to data published by the exchange. The head of India’s central bank has promised steps to ensure adequate liquidity in the system. His assurance, too, helped to uplift the market sentiment.

Indian Rupee gets stronger

The gains on the stock markets found their echo on the foreign exchange trading front, the Indian rupee gained 12 paise to finish at 73.52 against the U.S. Dollar. At the inter-bank forex market, the local unit witnessed high volatility against the dollar. It opened at 73.70, gained the lost ground and finally closed on a positive note at 73.52 against the US dollar, registering a gain of 12 paise over its previous closing price 73.64. During the session, the domestic unit touched an intra-day high of 73.48 and a low of 73.78 against the greenback. There are suggestions that the Indian central bank has thrown some sort of a protective ring around the spot price especially in the context of the growing skirmish in the India-China border. The market is keenly awaiting the outcome of the Fed policy meeting. More so, the anxiety is about details over the measures to drive the economy up. Fed, it is widely speculated, will give out details of its subtle shift in policy toward average inflation targeting.

Bond yields slip below 6%

On the whole, it was a somewhat gratifying day with the benchmark 10-year bond yield slipping below 6% to 5.99%, according to over-the-counter inter-bank yield quotes for this government bond maturity.

K. T. Jagannathan