Why Rupee and Sensex are rallying?

By | September 11, 2013

SENSEX and  Indian rupee has witnessed a dramatic turnaround since Wednesday, when Raghuram Rajan took over as the new governor of the Reserve Bank. Sensex yesterday closed above the psychological level of 20000, Nifty rallied 555 points in 4 days and Indian Rupee retraced back to 64 from life lows of 69 again of almost 6% Investors gained over Rs 5 lakh crore market wealth in past four trading days. Total market capitalization of actively traded stocks on BSE has increased by Rs 5.03-lakh crore to Rs 6,446,263 crore.

 

  • Rajan’s announcements have helped sentiments: His appointment has sparked badly-needed optimism among investors, analysts say. Rajan has given the confidence booster to market. Sometime just a sentence from central banker can do wonder and instill confidence in the market. Also on Technical ground we covered the following analysis   Has Indian Rupee made Short term Top, Weekly Analysis
  • RBI governor announced measures such as liberalization of the financial market by enhancing the limits for exporters to re-book cancelled forward exchange contracts and opening a special concessional window for swapping foreign currency non-resident (FCNR) deposits and dollar funds to support the rupee.Any Rise in Rupee will be good for stock market.
  • The government is also set to announce more steps over the next few days to curb non-essential imports, with expectations growing for a hike in subsidized diesel prices that would ease concerns about the government’s finances.
  • Improving global investor sentiment also helped the rupee. Russia’s proposal to work with Damascus to put Syria’s chemical weapons under international control was seen potentially averting planned U.S. military strikes. India is net importer of gold and oil and any fall in them is welcome and good news to market.
  • India’s trade deficit for the month of August which fell almost 11% month on month to $10.9 bn, which is also sharply lower than ~$20 Bn recorded in June of this year was a big booster for yesterday 700 point rally in SENSEX.
  • US Fed may delay tapering, or the magnitude of tapering might be less than expected, because of disappointing jobs data. This will help prevent exodus of funds from emerging markets, including India.
  • Dollar weakness: The dollar weakened against a basket of currencies including the euro, which the rupee tracks closely.
  • Global economic slowdown may have bottomed out: Upbeat Chinese industrial output and retail sales data on Tuesday added to growing evidence that China’s economic slowdown may have bottomed out.Also PMI data from China, Europe and the United States suggested the global economy as a whole was on a firmer footing.
  • September has been a good month for Stock Market as such. As discussed in weekly analysis. September is one of the most bullish month for Indian market and History repeats again :).Over the last four sessions, they have pumped in about Rs 4,500 crore into Indian equities. This is against a Rs 23,000 crore selling they did during June-August.

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