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Bullish street sees a positive start to Samvat 2078


MUMBAI: The decision by the US Federal Reserve on Wednesday night to start tapering its quantitative easing (QE) programme by $15 billion per month from November itself and the Indian government’s decision to cut excise duty on petro products helped the sensex on Thursday. The BSE index gained 296 points to end at 60,068 during the Muhurat session for Diwali. HDFC Bank, Reliance Industries and ITC led the gainers during the special evening session that ushered in Samvat Year 2078, while ICICI Bank witnessed some profit taking. Veterans on Dalal Street say that on the first day of the Samvat year, during the hour-long special trading session, one should only buy stocks, even if those are in small quantities, and should not sell any. During the Muhurat trading session on Thursday too, after a year of high gains when the sensex rose 38%, positive mood was seen in BSE’s International Convention Hall in the city. The mood was helped by the government’s post-market decision on Wednesday to sharply reduce petrol and diesel prices, a move expected to partially address the inflation fear in the country. The government’s decision came after prices of these two important petro products were increased several times in the past few months and were at record levels, mainly due to the rise in crude oil prices globally. The move is expected to directly have a calming effect on inflation as well as an indirect effect through reduction in transport costs. According to Barclays chief India economist Rahul Bajoria, the inflation impact of this decision will be limited on consumer price inflation (CPI), but it may reduce costs of logistics more materially. “Fuel prices have been climbing for the past three months, with both diesel and gasoline prices up over 20% year-on-year, hitting historical highs on level terms,” the report by Barclays noted. “The impact of this tax reduction will be limited on inflation, as diesel has a very small weight (0.15% in CPI), but the reduction in gasoline (2.2%) taxes will contribute materially. Overall, the direct impact of this price reduction will be 12 basis points (100bps = 1 percentage point) on headline CPI in November, and it will lead to an indirect impact of 12bps reduction in three months, bringing the total impact to 24bps,” Bajoria wrote. Additionally, late Wednesday late, after months of speculation as to when it is likely to pull the plug on its $120-billion-per-month bond-buying programme, the US Fed — the central bank of the world’s largest economy — finally said that it would start that in the current month. The reduced per-month buying limit would be $105 billion. As the uncertainty about the timing as well as the magnitude of the tapering ended, the Dow Jones index rallied over 100 points on Wednesday night. The rally in tech and chipmakers continued on Thursday too, which helped the S&P 500 and Nasdaq Composite to record highs. The end of the uncertainty is also expected to leave traders on Dalal Street to focus on other issues, market players here said. After a great year for equities, investors are looking forward to stock markets continuing to rise, though not at the same pace as the past year, said HDFC Securities MD & CEO Dhiraj Relli. “Global headwinds in the form of rising inflation and withdrawal of monetary stimulus may impact the momentum, but strength in Indian macros and improving micros may help offset these. Investors need to conduct portfolio and asset-allocation reviews, and raise the quality of stocks held in their portfolio,” Relli said.


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