Markets snapped two straight session of losses as the buying activity picked up on the back of favourable macroecomic numbers with the industrial production expanding at a better-than-estimated 4.2 % in July and the wholesale price index-based inflation plunging to a historic low of (-)4.95% in August creating room for RBI to slash key rates in the next monetary policy.
However, investors are patiently awaiting for the US FOMC meet due later during the week.
The Sensex ended at 25,857 up 247 points and the Nifty gained 83 points to close at 7,872.
The broader markets ended in line with the benchmark indices- BSE Midcap and Smallcap indices ended higher by 1.3% and 0.9% each.
Market breadth on the BSE ended positive with 1,701 shares advancing and 953 shares declining.
Macro-economic data
Wholesale price index for the month of August has contracted further to 4.95%.
The government is scheduled to unveil the consumer price index (CPI) data for the month of August 2015 after market hours today.
The IIP numbers that were announced on Friday post market hours showed that the industrial output grew at 4.2% in July thus indicating a revival in Indian economy.
"Wholesale price inflation dropped further to -4.95% YoY in August, from -4.05% in the previous month as the fall in international commodity prices continued to filter through the index.
The fall in inflation was in line with expectations and led by the fall in prices of manufactured products and fuel.
In particular, inflation in the manufactured products group declined to -1.92% in August from -1.47% while energy inflation fell to -16.5% from -12.81%,” said Richa Gupta, Senior Director, Deloitte India.
“However, the worrying part was that erratic rains in August seem to have resulted in prices of some vegetables and fruits picking up. Given, the deficit in rainfall, risks to food inflation have not abated completely and the government would need to keep a tight vigil on food price movements. "
"With the continuing decline in WPI, the focus now would be the CPI data and the upcoming Federal reserve policy meeting later in the week. A combination of lower CPI print and status quo by the Federal reserve will enhance the pressure on the RBI to cut rates further,” she added.
Stock Trends
Barring BSE Consumer Durables index, all other indices ended higher with BSE Power and Metal indices surging 2.5% each.
On the back of better than expected IIP numbers, LT and BHEL have gained on the Sensex. BHEL ended up 0.6% while L&T inched up.
Rate sensitive stocks gained across the boards on the back of positive macro-economic numbers as investors hope for a rate cut in the next monetary policy. In the banking space, Axis Bank, ICICI Bank, HDFC twins and SBI surged between 1-3%. In the realty pack, India Bulls Realty, Oberoi Realty, Sobha Realty and HDIL surged between 2.5-5%.
Sun Pharma gained 1% after traders cited optimism tied to the launch of Keveyis drug in the US market by unit Taro Pharmaceutical Industries.
The metal shares gained across the exchange as investors bought stocks at attractive valuations.
Meanwhile, the government will soon notify a 20% import tax on some hot-rolled steel products according to media reports. Vedanta, Hindalco and Tata Steel gained between 2-4%.
The technology stocks rallied ahead of the US Fed meet as hike in the interest rate will strengthen the US dollar. Wipro, Infosys and TCS gained between 0.2-3%.
Meanwhile, RIL ended with marginal losses after Barclays cuts RIL target price to 1,065 rupees from 1,090 rupees and rated it overweight
Kesoram Industries rose 1% while JK Tyre and Industries fell 3.5% after Kesoram Industries on Saturday announced it had concluded a deal to sell its tyre manufacturing unit near Haridwar in Uttarakhand to JK Tyre and Industries for Rs.2,195 crore.
Global markets
Asian shares reeled under pressure after Chinese markets were hit by weak data on Chinese factory despite apparent efforts by Beijing to prop them up.
Meanwhile, investors remained cautious ahead of the US Fed meet due this week.
The combination of worries about slowing growth in China and higher US borrowing costs have weighed on markets for weeks, becoming more acute as this week's Fed meeting has approached.
