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5-min read

Global Markets Change Significantly After G7 Summit, RBI's Nod to Surplus Transfer to Govt

The BSE Sensex surged 792.96 points or 2.16 percent to 37,494.12 while the Nifty50 rose 228.50 points or 2.11 percent to close above psychological 11,000 levels, at 11,057.90 and formed bearish candle on daily charts.

News18.com

Updated:August 27, 2019, 9:12 AM IST
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Global Markets Change Significantly After G7 Summit, RBI's Nod to Surplus Transfer to Govt
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New Delhi: Global and Asian stocks rose while safe-haven bonds retreated on Tuesday, as signs Sino-U.S. trade hostilities might be easing, for now, helped restore investor confidence after the previous session's rout.

Supporting the market mood, U.S. President Donald Trump on Monday flagged the possibility of a trade deal with China and said he believed Beijing was sincere in its desire to reach an agreement. Global markets had been roiled at the start of the week by new tariffs from the world's two largest economies.

Trump's comments after the G7 summit of world leaders in France followed Chinese Vice Premier Liu He's remarks that China was willing to resolve the trade dispute through "calm" negotiations. Beijing, however, declined to confirm that Chinese officials had contacted their U.S. trade counterparts.

Asian equity markets plummeted and European stocks had appeared set to follow suit after China and the United States announced further tariffs on each other's exports on Friday. Trump had announced an additional duty on some $550 billion of targeted Chinese goods, following the U.S. market close, hours after China unveiled retaliatory tariffs on $75 billion worth of U.S. goods.

The BSE Sensex surged 792.96 points or 2.16 percent to 37,494.12 while the Nifty50 rose 228.50 points or 2.11 percent to close above psychological 11,000 levels, at 11,057.90 and formed bearish candle on daily charts.

The market breadth remained in favour of bulls as more than two shares advanced for every share declining on the NSE. The Nifty Midcap index was up 1.6 percent and Smallcap index gained 2.3 percent.

As per the pivot charts, key support level is placed at 10,852.77, followed by 10,647.73. If the index starts moving upward, key resistance levels to watch out for are 11,166.57 and 11,275.33.

Nifty Bank closed at 27,951.35, up 992.70 points on Monday. The important pivot level, which will act as crucial support for the index, is placed at 27,208.66, followed by 26,466.03. On the upside, key resistance levels are placed at 28,344.56 and 28,737.83.

US Markets

US stocks surged on Monday after a sharp sell-off in the prior session as President Trump predicted a trade deal with China, cooling investor concerns after a ramp-up in rhetoric derailed markets last week.

The Dow Jones Industrial Average rose 269.93 points, or 1.05%, to 25,898.83, the S&P 500 gained 31.27 points, or 1.10%, to 2,878.38, and the Nasdaq Composite added 101.97 points, or 1.32%, to 7,853.74.

Asian Markets

Asian stocks tracked global peers higher on Tuesday while safe-haven bonds sold off as signs US-China trade hostilities might be easing helped restore investor confidence after the previous session’s rout.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.2% after dropping 1.3% the previous day. South Korea's KOSPI added 0.8% and Japan's Nikkei rose 1%.

Rupee drops below 72 mark against dollar on currency rout

The rupee on Monday declined by 36 paise and closed below the 72 level against the US dollar for the first time in nine months, hit by a 'flash crash' in global currencies due to uncertainty over the trade front. The rupee settled down by 36 paise at 72.02 to the US dollar, the lowest closing level since November 14, 2018, even as equities spurted more than 700 points at close on stimulus measures.

The local currency had retreated to a low of 72.25 in day trade following a flash crash in currencies such as Turkish lira, Chinese yuan, and Australian dollar against the US dollar. The global currencies faced a meltdown in the overnight trade due to the escalation between the US and China over the weekend.

SGX Nifty

Trends on SGX Nifty indicate a positive opening for the broader index in India, a with 0.57 percent loss or 62.5 points. Nifty futures were trading around 11,115-level on the Singaporean Exchange.

Oil rises after Trump says China trade deal likely

Oil prices rose on Tuesday after US President Donald Trump said he expected to sign a trade deal with China, calming nerves after a round of tit-for-tat tariff hikes had sent markets reeling.

Brent crude was up by 27 cents, or 0.5%, at $58.97 a barrel by 0024 GMT, after falling 1% the previous session, dropping for a third day in a row. US crude was up by 23 cents or 0.4% at $$53.87 a barrel, having also dropped 1% on Monday for a fourth day of declines.

Oil prices have fallen around 20% from a 2019 high reached in April, in part because of worries that the U.S.-China trade conflict is hurting the global economy, which could dent demand for oil.

RBI to transfer Rs 1.76 lakh crore surplus to government

The government will receive a windfall from the Reserve Bank of India (RBI) in the current financial year thanks to a much higher-than-expected dividend.

The decision by a committee specifically set up to look at whether the RBI was holding on to too much of its reserves recommended that it provide the government with Rs 1.76 lakh crore as a dividend in the bank’s fiscal year that ended June 30.

Although 280 billion of the 1.76 trillion rupees has been transferred to the government, that leaves 1.48 trillion rupees to be moved across in the current fiscal year that started on April 1, a statement by the RBI said on Monday.

"This is a structurally positive move as the surplus sitting with the central bank will now be used to stimulate the economy not only now but in the years to come," said Mahendra Kumar Jajoo, head of fixed income at Mirae Asset Global Investments in India.

BSE launches interest rate options

The BSE on Monday started the trading of government bonds-based interest rate options, according to the exchange. "BSE launched interest rate futures in January 2014, which have an average market share of 40 percent and has now expanded its offerings in interest rate derivatives with the launch of options," the bourse said in a release.

Billionaire investor-trader Rakesh Jhunjhunwala says he has never seen such pessimism in the market and that it 'looks overdone', reports ETNow. He sees a 'buying opportunity' in this market, but feels expectations of an immediate rebound is 'way too much'.

Speaking on the measures rolled out by Finance Minister Nirmala Sitharaman on August 23, the Big Bull said: "There is no one thing that can revive sentiment. We need a series of measures to improve sentiment and the steps taken by the Finance Minister will revive sentiment in the economy."

1 stock under F&O ban period on NSE

On August 27, IDBI Bank is under F&O ban. Securities under the ban period in the F&O segment include companies in whose security has crossed 95 percent of the market-wide position limit.

With inputs from agencies

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| Edited by: Ahona Sengupta
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