The Sensex and the Nifty surged nearly one per cent, posting their highest close in two weeks, on the back of positive IIP and inflation numbers for July and as investors shrugged off weak Chinese data and uncertainty whether the US Federal Reserve would hike rates later this week.
The WPI inflation has declined to (—)4.95 per cent in August from (—)4.05 per cent in July. Aso, industrial production expanded at better-than-estimated 4.2 per cent in July this year compared to the same month last year as manufacturing activity and offtake of capital goods improved.
Among BSE sectoral indices, metal index was the star-performer and was up 2.7 per cent, followed by power 2.5 per cent, banking 1.88 per cent and PSU 1.82 per cent.
Top five Sensex gainers were NTPC (+5.06%), VEDL (+4.02%), Tata Steel (-3.54%), Hindalco (+3.42%) and Axis Bank (+3.05%), while the only two losers were Bajaj Auto (-0.35%) and Maruti (-0.22%).
Broker's comment
Sageraj Baria of East India Securities said: "As the US fed meets later this week, we believe that they are gonna face a huge dilemma. On one hand you have a 1.8% core inflation, 8-year-low unemployment rate & a healthy GDP growth rate which are any central banker's wish and with this set up, there is no reason to continue with near zero interest rate and a rate hike is more than called for. However, on the other hand you have a sort of turmoil in equity markets which has eroded ~$6tn of wealth, Chinese economy continues to pose deflationary threat and commodity prices are more than broken. US FOMC would not want to take any chances to risk the economic growth and that's where the dilemma lies. We believe that there cannot be any better time to hike rates and get this event out of the way as markets dislike uncertainty. We remain positive on the medium & long term outlook for the markets and recommend to buy into every weakness."
Global markets
Stocks rose on Monday, shrugging off tepid Chinese economic data, while the dollar weakened before a US Federal Reserve decision on whether to raise interest rates for the first time since 2006 later this week.
Shares fell in China and Japan, though MSCI’s main index of Asia-Pacific stocks, excluding Japan, rose 0.5 per cent and European shares followed them higher.
The pan-European FTSEurofirst 300 index rose almost 1 per cent with Britain’s FTSE 100 index up 1.2 per cent.
Asian shares came under pressure on Monday after Chinese markets were hit by soft economic data, while the dollar sagged as investors questioned whether the US Federal Reserve will be confident enough to raise rates for the first time in almost a decade.
MSCI’s broadest index of Asia-Pacific shares outside Japan was wavering between positive and negative territory.