Sensex falls; rupee strengthens

India’s benchmark stock gauge fell yesterday, ending two sessions of gains, as metal makers declined.The S&P BSE Sensex slipped 0.6%, led by Tata Steel, which dropped the most in more than four months. Reliance Industries, operator of the world’s largest oil refiner, fell 2.8%, the most in over two months, as it was barred from trading futures and options on India’s equity markets for a year after regulators found it guilty of manipulating share prices.“We now expect the markets to track fundamentals given limited headroom for a valuation re-rating,” Rajat Agarwal, a strategist with Societe Generale in Bengaluru, wrote in a report with two other analysts. “We think the delivery of expected earnings growth should be the key driver of equities henceforth,” he said.Societe General expects Indian’s benchmark gauge to rise to 31,500 by the end of December. It forecasts 14% to 15% earnings growth for the next financial year starting in April compared with a consensus estimate of 18%. It expects construction and infrastructure-related sectors to benefit from the central government’s push for affordable housing and likely ramp-up of development activities.NSE Nifty 50 Index climbed to a record after Modi’s resounding victory in state elections earlier this month was taken as a referendum on his economic policies, including the junking of high-value currency notes in November.While the move disrupted businesses, the rally drove India above Japan as the most expensive in the region.Meanwhile the rupee yesterday strengthened further against the US dollar on the hopes of more reforms by the Narendra Modi-led government.The rupee closed at 65.05 — a level last seen on October 28, 2015, up 0.56% from its Friday’s close of 65.42. The rupee opened at 65.28 a dollar and touched a high of 65.03 — a level last seen on October 28, 2015.The National Democratic Alliance (NDA) government introduced the last batch of legislations in the Lok Sabha for rolling out the Goods and Services Tax, or GST.On Friday, Union finance minister Arun Jaitley had said that the government is working on a radical proposal to resolve the issue of bad debts in the Indian banking systems. These reforms will help to attract more foreign investments in the country.So far this year, rupee has gained 4.3%, while foreign institutional investors have bought $4.77 billion and $2.95 billion from local equity and debt markets, respectively.The 10-year bond yield closed at 6.711% — a level last seen on 7 February, compared to its Friday’s close of 6.831%. Bond yields and prices move in opposite directions.Also, weakness in the dollar on the speculation that the US President Donald Trump may struggle to push through economic stimulus programmes after the failure of his health-care deal, boosted the sentiment.Asian currencies markets were trading higher. Japanese yen was up 0.1%, Taiwan dollar 0.9%, South Korean won 0.87%, Thai baht 0.54%, Singapore dollar 0.47%, Philippines peso 0.32%, Malaysian ringgit 0.29%, China Offshore 0.25%, Indonesian rupiah 0.13%, China renminbi 0.1%.The dollar index, which measures the US currency’s strength against major currencies, was trading at 99.116 — down 0.51% from its previous close of 99.627.