QE3 sends Indian indices higher

Fri, 14 Sep Closing

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As the Indian government took the step to raise diesel prices and the US Fed announced its third round of quantitative easing, Indian equity markets took these developments as a positive sign and opened with strong gains. This buoyancy was sustained throughout the trading session today ensuring that the indices closed well above the dotted line. While the Sensex today closed higher by 443 points (up 2.5%), the NSE-Nifty today closed higher by 142 points (up 2.6%). This impact was rubbed off on the BSE Mid Cap and the BSE Small Cap as well as they closed higher by 1% and 0.5% respectively. Gains were largely seen in metal, banking and Oil and gas stocks. However, healthcare and FMCG stocks were at the receiving end.

As regards global markets, Asian indices closed firm today while European indices have also opened in the green. The rupee was trading at Rs 54.31 to the dollar at the time of writing.

As per a leading business daily, the wholesale price index (WPI) for the month of August 2012 rose to 7.55% which was higher than expected. In July this was 6.87%. Hike in fuel prices, weak rupee and high commodity prices were some of the main reasons that fuelled inflation. Given that the Reserve Bank of India (RBI) is quite clear that rate cuts would be difficult in an inflationary environment, it is upto the government to take steps to remove bottlenecks on the supply side and bring the deficit down. This is if inflation from a long term trend is to come down. Further, the central bank is likely to have its hands full on the US Fed's recent announcement of QE3. This is bound to bring surplus cash to the Indian economy and put further pressure on inflation.

Pharma stocks closed in the red today with the key losers being Glenmark, Lupin and Ranbaxy. As per a leading business daily, Ranbaxy Malaysia Sdn Bhd (RMSB), a wholly owned subsidiary of Ranbaxy Laboratories has received approval to set up a manufacturing facility in Malaysia as an entry point project (EPP). The company plans to invest US$ 40 m in this project. This will be Ranbaxy's second manufacturing facility in Malaysia. Besides catering to the Malaysian market, this facility will also export products to markets such as West Asia, Europe, Sri Lanka and China among others. Given the high competition that is prevalent in the US generics market, this move is part of Ranbaxy's strategy to strengthen its foothold in the emerging markets with the aim of generating higher revenues and profits.