Post session - Quick review

Markets bid adieu to October F&O series in style, factoring in the negative’s staged triumphant moves ahead of a crucial announcement on Wednesday where European leaders are expected to hammer out deal on enhancing the region's bailout fund. The market mirrored gains across Asia, eyeing the  potential European deal on bank recapitalization, and signs that France and Germany were close to agreement on how to use the European Financial Stability Facility (EFSF).  

Festive mood at Dalal Street mainly offset the 13th rate hike in last 18 months by RBI in its second quarterly monetary policy review 2011-2012. The central bank of India besides, hiking the key policy rates by a quarter points lowered growth estimates for the current fiscal at 7.6% from the earlier prediction of 8%. The downside projection was mainly on account of slowing global economy and moderating domestic demand. Post to the rate hike, repo rate (rate at which RBI lends to banks) stood at 8.50%. Accordingly, the Reverse repo rate stands adjusted at 7.5%. 

However, the investor’s grabbed few blue chip stocks before going for the Diwali Mahurat trading, comforted by the dovish comments of RBI. The Central bank said, “the likelihood of a rate action in the December mid-quarter review is relatively low. Beyond that, if the inflation trajectory conforms to projections, further rate hikes may not be warranted”. RBI in its guidance reported that the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It further stated that the apex bank expects it to moderate further in the first half of 2012-13. The domestic market will be closed on Thursday for Diwali festivals.

On the global front, US stocks rose on Monday, as a flurry of merger activity and strong earnings from Caterpillar boosted investor sentiment and kept the three-week rally intact. The Dow Jones industrial average advanced 104.83 points, or 0.89 percent, to 11,913.62. The Standard & Poor's 500 Index rose 15.95 points, or 1.29 percent, to 1,254.20. Meanwhile, Asian shares too following the gaining trajectory of Wall Street ended on a positive note ahead of a crucial announcement Wednesday on how Europe plans to stem its debt crisis.  However, the European stocks steadied on Tuesday as earnings news offset fresh political uncertainty a day ahead of the euro zone leaders' meeting. A demand for signoff rights from German politicians on details of the plan, ahead of the Wednesday summit; combative comments from Italy's leader on the country's austerity reform plan and lack of agreement on changes to its pension system overnight were capping gains in early trade.

Back home, on the BSE Sectoral front, stocks from Consumer Durable, Bankex and Public Sector Undertaking counters felt the heat of profit booking.  Shares of banking pivotal felt the pinch as RBI while hiking key policy rates, announced the deregulation of savings rates with immediate effect (currently at 4 percent). As per the new norms, Savings bank account rate will now be linked with the policy rate, at which, the central bank lends short-term funds to commercial banks. Hence, banks can now set their own savings deposit rate. However, Savings bank deregulation would hurt the banks with higher CASA (low cost deposits) rates and benefit ones with low CASA in long run. Reacting to this, HDFC Bank fell the most by 4.21%, Bank of Baroda was down 3.05%, Axis Bank shares lost 2.91%, State Bank of India's shares lost 2.73%.  Meanwhile, ICICI Bank shares were trading 0.77% lower. On the flip side, stocks from Auto, Information Technology and Oil & Gas counters stood tall in trade with glittering gains of over 2.50% each. 

30 share index barometer index on Bombay Stock Exchange (BSE) rallied over 300 points to shut shop above 17200 level. Meanwhile, the 50 share broadly followed index on National Stock Exchange (NSE) - accumulating over a century of points settled at a kissing distance of 5200 mark.

The market breadth on the BSE ended slightly in red; advances and declining stocks were in a ratio of 1349:1387 while 130 scrips remained unchanged.

The BSE Sensex gained 362.41 points or 2.14% and settled at 17,301.69. The index touched a high and a low of 17,303.93 and 16,900.26 respectively. 27 stocks advanced against 3 declining ones on the index (Provisional)

The BSE Mid-cap index gained 0.56% while Small-cap index was down 0.02%. (Provisional)

On the BSE Sectoral front, Auto up 3.17%, IT up 2.87%, TECk up 2.42%, Oil & Gas up 2.36% and Metal up 2.08% were the top gainers while Consumer Durables down 3.16% and Bankex down 0.81% were the only losers.

The top gainers on the Sensex were M&M up 5.42%, Sterlite Industries up 4.53%, HDFC up 4.32%, Bajaj Auto up 4.03% and Sun Pharma up 3.76%.

On the flip side, SBI down 3.63%, HDFC Bank down 2.91% and BHEL down 1.18% were the only losers on the index. (Provisional)

Meanwhile, the Reserve Bank of India (RBI), which raised its key policy rates for the 13th time since Match 2010, had indicated that it may not go for another rate hike in the near future. While announcing the credit policy, the RBI Governor D Subbarao said that the inflationary pressures are expected to ease starting December 2011 and is likely to go down to 7% by March 2012 and hence further rate hike may not be required to curb inflation.

The headline inflation measured by the Wholesale Price Index (WPI) have been hovering around double digit mark, as per the official data, headline inflation for the month of September stood at 9.72%, which is way above the RBI’s comfort zone and RBI governor expects inflation and inflationary expectations to be at the current level for coming two months.

On the RBI’s anti-inflationary monetary stance, he said the impact of past monetary policy is still unfolding and hence the RBI, for now, is persisting with the anti-inflationary monetary stance. However, he expects inflation to decline from December onwards and a decline in inflation will help in keeping the chances of a rate hike in early 2012 low.

Earlier, the RBI had cumulatively raised the cash reserve ratio (CRR) by 100 basis points. However, on the basis of current assessment, bank rate and CRR has been retained at 6%. The RBI has also left the statutory liquidity ratio (SLR) untouched at 24%. Further the RBI also deregulated the savings bank deposit interest rate with immediate effect, with some condition.

Based on two conditions banks are free to determine their savings bank deposit interest rate. First the banks will have to offer uniform interest rates on the saving banks deposits up to Rs 1 lakh, irrespective the amount in the account within Rs 1 lakh and saving banks deposits more than Rs 1 lakh banks are free to offer differential rate of interest. However, banks cannot do any discrimination from customer to customer on interest rates for similar amount deposit.

India VIX, a gauge for market’s short term expectation of volatility lost 11.53% at 22.31 from its previous close of 25.22 on Monday. (Provisional)

The S&P CNX Nifty gained 111.05 points or 2.18% to settle at 5,209.40. The index touched high and low of 5,211.00 and 5,085.55 respectively. 43 stocks advanced against 7 declining ones on the index. (Provisional)

The top gainer on the Nifty were, Kotak Bank up 6.18%, M&M up 5.08%, Sterlite up  5.05%, ACC up 4.99%  and Grasim up 4.96%.

On the other hand, PNB down 4.66%, Axis Bank down 4.33%, SBI down 3.48%, HDFC Bank down 2.59% and BHEL down 0.82% were the top losers. (Provisional)

The European markets are trading in mix, with France's CAC 40 down 0.30%, Germany's DAX up 0.36% and FTSE 100 up 0.27%.

Asian markets made a mixed closing on Tuesday a day ahead of the European leaders meeting, while the Chinese market surged over one and half a percent, extending its previous session after a report showed China’s manufacturing may expand this month and also on some good earnings announcements. German Chancellor Angela Merkel and fellow European leaders will meet in Brussels tomorrow for a second summit in four days to find ways to enhance the firepower of a regional rescue fund. The Shanghai Composite Index has gained over 4 percent in last two days. On the other hand, the Japanese market lost stem after Finance Minister Jun Azumi kept up his warning to markets about pushing up the yen too far. The yen's strength and Europe's debt woes pose risks to external demand that could hurt export-oriented firms' profits and weigh on the economy's recovery.