Sensex up 62 points as weakening rupee boosts software stocks

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The benchmark S&P BSE Sensex added 62 points after a choppy session today ahead of the two-day US Federal Reserve meeting that is expected to determine the timing and extent of stimulus tapering.

IT stocks were in demand as the rupee weakened against the dollar, as were metal, FMCG and auto shares. Investors were also cautious about the RBI’s mid-quarter monetary policy review later this week.

The 30-share Sensex traded between 19,635.44 and 19,819.10 before settling at 19,804.03, a rise of 61.56 points or 0.31 per cent.

The broader, 50-share Nifty index on the National Stock Exchange edged up 9.65 points, or 0.17 per cent, to 5,850.20. The SX40 index on the MCX Stock Exchange ended at 11,722.64, up 7.19 points or 0.06 per cent.

“Investors were showing indecision and caution ahead of US Federal Reserve meeting,” said Rakesh Goyal, senior vice president at Bonanza Portfolio Ltd. “Also, profit-booking at higher levels was seen in select index heavyweights.”

The policy meeting of the Federal Open Market Committee (FOMC) starting today may decide on cutbacks in its bond-purchase programme, which has kept global markets flush with liquidity.

Investors are also waiting for new Reserve Bank of India governor Raghuram Rajan’s maiden monetary policy review on September 20 amid concern that options for a rate cut are limited after wholesale price inflation rose to a six-month high of 6.1 per cent in August from 5.79 per cent in July.

The Prime Minister’s Economic Advisory Council chairman C Rangarajan said inflation and the foreign exchange market are expected to weigh on the RBI’s policy decisions.

IT stocks rose as the rupee weakened against the dollar after closing at 62.83 Monday. Software exporting companies such as TCS, Wipro and Infosys benefit from a weak rupee, which boosts revenue when the dollars they earn are converted into the local currency.