Sensex steady in thin trade; rupee weakens

Reuters

Mumbai

Indian shares were trading flat yesterday, giving up gains earlier in the session as investors refused to take big risks ahead of the year-end holidays, while muted sentiment across the region also weighed. Trading volumes remained low as investor interest was subdued despite Friday being the first trading day for the new monthly derivatives contract, traders said.

Overseas investors sold Indian shares worth Rs28.1bn ($441.55mn) on Wednesday, provisional exchange data showed. Foreign institutional investors have been selling shares for the 11th straight session, totalling about $1.5bn, exchange and regulatory data showed. “Markets are likely to trade rangebound for the time being. People are waiting for the budget, which would be the next big trigger,” said Suresh Parmar, head, institutional equities at KJMC Capital Markets.

The benchmark BSE index was down 0.03%, while the broader NSE index added 0.07%.

State-run banks were among the gainers. State Bank of India rose 0.8%, while Punjab National Bank was trading up 1.2% on reforms and stake sale hopes, traders said.

Reliance Capital gained 2.1% after Japan’s Sumitomo Mitsui Trust Bank agreed to acquire 2.77% stake in the company for $58.4mn. Consumer goods makers were among the losers. Hindustan Unilever fell 0.9% and ITC dropped 0.8%. Shares in Gujarat State Fertilizers and Chemicals fell 3.1% after the Reserve Bank of India restricted overseas investors from buying more shares in the company.

Meanwhile the rupee continued its fall against the dollar for the third straight session on month-end dollar demand and profit-booking by foreign investors ahead of the end of the year.

“Because of year-end not too many people were willing to add positions. There was some selling by FIIs (foreign institutional investors) which led to dollar outflows,” said Anoop Verma, vice-president in treasury at Development Credit Bank in Mumbai.

Volumes were thin in the holiday-shortened week, and traders expect bonds and the rupee to rise only in the first week of January. Bonds and the rupee are expected to remain under pressure next week until foreign investors start allocating funds in India, traders said. The partially convertible rupee closed at 63.5575/5675 per dollar after falling to a low of 63.70 earlier in the day. It had closed at 63.5150/5250 on Wednesday.

The benchmark 10-year bond yield touched 7.9997%, its highest since December 17, and closed 2 basis points higher at 7.98%. It traded in a band of 7.9544-7.9997%.

In the overnight indexed swap market, the benchmark five-year swap rate closed flat at 7.29%, while the one-year rate fell 2 bps to 7.86%. Indian bonds fell for the second straight session yesterday, with the yield on the 10-year benchmark paper touching its highest level in more than a week, as auction cut-offs set by the central bank disappointed the market.

Also, doubts about the government’s intention to stick to the fiscal consolidation roadmap surfaced after local news agency Cogencis reported on Wednesday that finance ministry officials were debating a fiscal deficit target of 4% of gross domestic product for 2015/16 to spur public spending.