Sensex closes 246 points up on fall in WPI inflation

Hopes of a rate cut by the apex bank on the back of strong macro economic data buoyed the Indian equities markets on Monday leading to the Sensex closing 246 points up.

The better-than-expected wholesale price index (WPI) and a modest factory output data cheered investors. The hopes of a healthy consumer price index (CPI) data, expected to be released later in the day, further supported the markets.

The barometer 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE) had closed 1.96 points or 0.05 per cent down on September 11 - the last trading day.

The S&P BSE Sensex, which opened at 25,706.87 points, closed at 25,856.70 points - up 246.49 points or 0.96 per cent from Friday's close at 25,610.21 points.

On Monday, the wider 50-scrip Nifty of the National Stock Exchange (NSE) closed 82.95 points or 1.06 per cent up at 7,872.25 points.

Analysts cited healthy WPI data released on Monday and Friday's index of IIP numbers for July to be the positive triggers for the markets.

"The WPI has come in within expectations and shows further decline. The IIP data released late on Friday too cheered the investors," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

"Though the IIP data's growth was more or less due to last year's base effect and was subdued in comparison to the previous month, it is still very respectable when compared to other large economies," James said.

"Banks, financial sectors and metal stocks rose. There is expectations that the IIP, WPI and CPI will have a positive bearing on the Reserve Bank's decision on a rate cut."

Despite a steep rise in prices of pulses and onions, India's annual inflation rate based on wholesale prices continued in the negative territory in August, falling to (-)4.95 per cent.

The wholesale prices had decelerated by (-)4.05 per cent in July. The steep decline in August was mainly led by lower fuel prices.

Another key macro indicator showed that India's factory output had grown by 4.2 per cent in July against a marginal rise of 0.9 per cent in the like month of last year.

On the other hand, the growth seemed to have slowed when compared to the revised figures for June which showed a rise of 4.4 per cent against a rise of 3.8 per cent which was published in the "Quick Estimates of IIP" released on August 12 last.

The major data of IIP, WPI and CPI are the last significant pointers towards Reserve Bank of India's (RBI) rate decision.

India Inc. expects a better-than-expected WPI and CPI will drastically improve chances of a rate cut during RBI's monetary policy review slated for September 29.

The WPI and CPI indicators are also important, as they will give domestic guidance to the capital markets, just before the US Fed's Federal Open Market Committee (FOMC) meet on September 16-17.

The US Fed will decide during the FOMC meeting whether or not to raise interest rates.

Vaibhav Agrawal, vice president, research, Angel Broking, told IANS: "Markets are trading higher despite weak Asian cues, led by the better than expected industrial production figures."

"On the global front, investors continue to remain cautious ahead of the Fed meet."

Sector-wise, all 12 indices of the S&P BSE made gains during the trade.