Better sentiment soothes D-Street

MUMBAI/NEW DELHI: Calm returned to the financial markets on Wednesday after government officials hinted at the possibility of some measures being unveiled to tackle the rupee’s slide.
Helped by a recovery in the Indian currency after touching a historic low — and strong buying in FMCG, metal and capital goods stocks — the sensex, too, staged a smart comeback after two sessions of selloff to close 305 points higher at 37,718.
Wednesday’s trading also witnessed some softening of the benchmark yield, after it touched a four-year high of 8.19 per cent on Tuesday. The bond yield closed at 8.13 per cent after an intra-day high of 8.23 per cent. A healthy 19.2 per cent growth in India’s exports in August also boosted sentiment, market players said.
In early trades on Wednesday, the rupee touched a new lifetime low of 72.92 to a dollar, but comments from a government official about measures to tame the currency triggered a dramatic recovery later.
It got a further boost after economic affairs secretary Subhash Chandra Garg took to Twitter and assured the financial markets that the government and the central bank were on the job to support the currency. The rupee closed the session with a 50 paise gain at 72.19.
There were also talks of a probable intervention by the RBI to arrest the rupee’s weakness. HDFC Securities head (private client group and capital market strategy) V K Sharma said, “Strong intervention and exporter selling led to a sharp appreciation in the currency today. News of an economic review meeting to be chaired by the Prime Minister over the weekend also helped sentiment.”
Among the 30 sensex stocks, in terms of contribution, ITC led the gainers after ending 3.1 per cent higher. Other top gainers were Reliance Industries (up 1.1 per cent) and HDFC Bank (up nearly 1 per cent). Among the laggards were Axis Bank (down 2.3 per cent) and Tata Motors (down 1.7 per cent).
Government officials said the shortage of oil created by Opec is “not real” and pointed to the strength of the country’s economy. They said the government is committed to meet the fiscal deficit target for the current financial year. They ruled out any cut in excise duty on petroleum products as it may lead to a problem on the deficit front and reiterated that there is no need to panic or adopt a knee-jerk reaction to calm the rupee.