Markets close at highest level in 2014 after inflation eases to 5-month low

Indian equity markets today ended at their highest level since 2014 after December WPI inflation eased to a 5-month low of 6.16 percent. While Sensex surged nearly 257 points to end at 21,289.49, Nifty breached the 6300 level to close 79 points higher at 6320.

Lower WPI suggests the RBI staying pat in the medium term is a likely scenario. I don’t see the RBI showing any urgency to announce any new policy measures at this point of time, particularly when we have elections around the corner.

“Food prices are lower, fuel is also low, and manufacturing inflation is within expectations, so naturally what the RBI did last month by staying pat was a prudent decision. Going forward, we are evaluating whether this decline in inflation is sustainable. If it does, then RBI was right in raising rates in September 2013,” said Suresh Kumar Ramanath, Regional Rates and Currency Startegist at CIMB.

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[caption id=“attachment_1108927” align=“alignleft” width=“380”]  Markets soared in trade today.[/caption]

The Nifty earlier breached the psychological 6,300 level, its highest intraday level since January 2 on easing inflation, but gains were capped at higher levels on profit-taking.

Rate-sensitive stocks led gains after headline inflation eased on lower vegetable prices, increasing odds that interest rates will stay on hold on January 28 when the RBI meets next.

Coal India closed 2.18 percent higher after the cash-rich PSU declared an interim dividend of Rs 29/share.

IOC closed 1.6 percent higher as the Government is mulling Oil India picking up about 7% in IOC and ONGC picking up about 3% in IOC.

Liberty Shoes declined 5.72 percent even though the company’s Q3 net profit jumped to Rs 3.2 crore against Rs 1.8 crore in the year-ago period.

YES Bank closed 1.86 percent higher after its Q3 profit jumped 21.4% YoY to Rs 415.6 cr supported by non interest income, but asset quality weakened.Net interest income, the difference between interest earned and interest expended, rose 14 percent, slightly below estimates, to Rs 665.4 crore on account of a cautious and steady growth in advances. Gross non-performing assets (NPA) as a proportion of gross advances more than doubled (up 12 basis points sequentially) to 0.39 percent in Q3 compared to 0.17 percent in a year ago period.Net NPAs increased to 0.08 percent in December quarter from 0.04 percent in previous quarter as well as corresponding quarter of last fiscal.

With inputs from Reuters