Shares, rupee up ahead of rate decision

Reuters: Shares rose for the sixth straight session on Thursday to hit a new 1-1/2 year high, led by banking shares as expectations of a rate cut at the Central Bank’s policy meeting on Friday boosted local investor appetite for stocks.

The main stock index edged up 0.46%, or 28.61 points, to 6,238.71, the highest close since 14 November 2011.

“The market is up on positive sentiment as investors expect a rate cut from the tomorrow’s policy rate decision,” a stockbroker said on condition of anonymity.

Analysts said they also expect a rate cut at the Central Bank’s May monetary policy announcement. But a Reuters poll showed it will hold rates steady and expects a rate cut in June.

Shares have been on a rising trend on expectations of a fall in interest rates after Treasury Secretary Dr. P.B. Jayasundera and the Central Bank said interest rates could ease in May-June.

The market has gained 8% since the Treasury Secretary’s comments on 9 April.

The International Monetary Fund, however, last week said Sri Lanka must not loosen monetary conditions as inflation remains a concern, even though prices rose at a slower pace in April than in the previous month.

Turnover was Rs. 2.14 billion ($ 16.97 million), well above than this year’s daily average of Rs. 1.02 billion.

Foreign investors were net buyers of Rs. 194.1 million of shares, extending the net foreign inflow so far this year to Rs. 9.31 billion. Last year, the Bourse saw a net inflow of $ 303 million.

The rupee edged up to 126.00/10 per dollar, firmer from Thursday’s close of 126.05/08, on bank dollar sales amid tight rupee liquidity in the market ahead of the policy announcement, currency dealers said.