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Rate cut hopes, reforms and cheap oil spur rally

Hopes of a rate cut by the central bank, coupled with cheaper oil and stability in international markets, buoyed Indian equity markets during the trading days ended July 17, analysts said.
Even expectations of a somewhat positive first-quarter results season, signals of a delay in the US rate hike by the US Federal Reserve and a cut in transportation fuel prices cheered investor sentiments, they added.
The barometer index of the Indian equity markets, the 30-scrip Sensitive Index of the S&P Bombay Stock Exchange gained 801.90 points or 2.89 per cent during the weekly trade ended July 17.
The index closed at 28,463.31 points in the week under review from the previous close of 27,661.40 points on July 10.
The bullish movements came a week after the barometer index had lost 431.39 points or 1.53 per cent.
"The markets are hopeful of a rate cut from the Reserve Bank of India in its upcoming monetary policy review in August," Anand James, co-head of the technical research desk at Geojit BNP Paribas, told IANS.
According to James, data points such as the Index of Industrial Production (IIP), Consumer Price Index (CPI) and Wholesale Price Index (WPI) have come in line with estimates.
These data points, coupled with a good monsoon, have renewed hopes of an RBI rate cut in August.
On July 10, the IIP showed a slowdown to 2.7 per cent for May, against 4.1 per cent in April.
Another factor for the healthy performance during the week under review was the culmination of the Iran nuclear deal, analysts cited.
"The deal is important for India as it can now import more oil from Iran on cheaper rates and increase its exports of pharmaceutical and other products to that country," James added.
Another major event in the week gone by was the passage of various austerity laws aimed at paving the way for a European Union backed bailout package.
Even the stability in the Chinese markets also supported the investor sentiments here.
Also, the cabinet's approval for composite cap for foreign investments in a company also led to a rally in the later part of the week.
"The market is awaiting further clarification on the composite cap decision. The decision led to a rally in banking stocks," Vaibhav Agarwal, vice-president and research head at Angel Broking, told IANS.
The move is expected to remove the distinction between foreign portfolio investors, foreign direct investments and non-resident Indian investments.

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