Post Session: Quick Review

Giving thumbs down to RBI’s unexpected move of hiking key policy repo rate by 25 basis points, local equity markets witnessed heavy sell-off for yet another session, however the recovery which emerged during the second half of the session, led to a flat close at Dalal Street, albeit with negative bias. Local equity markets getting a gap-up start after previous session’s heavy drubbing, took a turn for the worse after RBI’s third quarter monetary policy failed to be on expected line, with its chief, Raghuram Rajan delivering a hawkish policy, while keeping the policy tone dovish. Market perhaps drew some comfort from the hopes that there would be no policy rate hike in the near future after RBI’s policy stance suggested that further policy steps would be data dependent and that the further policy tightening in the near term was not predictable at this juncture. These hopes also provided some relief to banking stocks, which after collapsing like house of cards to a knee jerk reaction on RBI’s decision of hiking rates, recovered most of the lost ground to end bit lower.

Thus, in the dilly-dally session of trade, both Sensex and Nifty, recovering substantial ground, ended above the crucial 20,650 and 6,100 psychological levels, with slender loss of close to one tenth of a percent. On the flip side, broader indices, ended in green, albeit with slender gains.

On the global front, Asian markets ended mixed on Tuesday after suffering a heavy sell-off in the previous session, as traders remained nervous over emerging economies as they await the Federal Reserve's next move on its stimulus programme. On the flip side, European shares bounced back from near one-month lows, helped by a rise in Siemens after the German engineer posted higher first quarter profits.

Closer home, another mood dampener for Indian equity markets was the heavy plunge of Maruti Suzuki. The company, despite reporting decent set of Q3 numbers, reversed gains and plunged over 9 per cent to hit its lowest level since November 11, after the board approved plan to set up a subsidiary in Gujarat which would be fully owned by Suzuki. On the result front, India’s largest car manufacturer surpassed street expectation with the third quarter net profit rising 36% year on year, driven by strong operational performance, higher localization and favorable forex. Sectorally, gains in Metal, Realty and FMCG counters were offset by the losses in Information Technology, Healthcare and Banking counters. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1298: 1242, while 149 scrips remained unchanged. (Provisional)

The BSE Sensex lost 13.53 points or 0.07% to settle at 20693.92. The index touched a high and a low of 20795.35 and 20554.28 respectively. Among the 30-share Sensex, 16 stocks gained, while 12 stocks declined and two stocks remains unchanged. (Provisional)

The BSE Mid cap and Small cap indices ended higher by 0.01% and 0.14% respectively. (Provisional)

On the BSE Sectoral front, Metal up by 1.60%, Realty up by 1.27%, FMCG up by 0.51%, Consumer Durables up by 0.23% and Capital Goods up by 0.20% were the top gainers, while IT down by 0.88%, Teck down by 0.96%, Healthcare down by 0.81%, Bankex down by 0.18% and Power down by 0.13% were the top losers in the space. (Provisional)

The top gainers on the Sensex were Tata Steel up by 3.45%, SSLT up by 2.20%, Hindalco Industries up by 2.16%, Tata Motors up by 2.10% and Bajaj Auto up by 1.69%, while, Maruti Suzuki down by 9.33%, Axis Bank down by 3.54%, Sun Pharma down by 2.25%, Infosys down by 1.45% and Cipla down by 1.20% were the top losers in the index. (Provisional)

Meanwhile, carrying out a quite shift from Wholesale price index (WPI) to new Consumer price index (CPI) for anchoring monetary policy, Reserve Bank of India (RBI), shocking the markets increased the repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 8.0% from 7.75%. With this, the reverse repo rate under the marginal standing facility (MSF) and the Bank Rate stand higher at 7.0% and 9.0% respectively. However, Cash Reserve Ratio (CRR) was left unchanged at 4.0% of net demand and time liability (NDTL).

Consistent with its December guidance of waiting for more data before acting, RBI much against street’s expectation of holding key policy rates unchanged,  went on to hike rates after CPI inflation, excluding food and fuel, remained flat and WPI inflation excluding food and fuel rose. RBI, in its assessment highlighted that while retail inflation measured by the consumer price index (CPI) declined significantly on account of the anticipated disinflation in vegetable and fruit prices, it remained elevated at close to double digits. Moreover, it pointed that inflation excluding food and fuel too was high, especially in respect of services, indicative of wage pressures and other second round effects.

On the growth front, RBI in its policy document stated that if policy actions succeeded in delivering the desired inflation outcome, real GDP growth could firm up from a little below 5% in 2013-14 to a range of 5 to 6% in 2014-15, with risks balanced around the central estimate of 5.5%.

Further, on Urjit Patel Committee’s recommendation, RBI’s in its policy stand and rationale indicated this as “glide path” for disinflation that sets an objective of below 8% CPI inflation by January 2015 and below 6% CPI inflation by January 2016.

However in a bit of positive, RBI on future trajectory of rates, underscored that the extent and direction of further policy steps would be data dependent, though if the disinflationary process evolves according to the baseline projection and that the further policy tightening in the near term was not predictable at this juncture.

India VIX, a gauge for markets short term expectation of volatility lost 5.08% at 17.72 from its previous close of 18.67 on Monday. (Provisional)

The CNX Nifty lost 4.70 points or 0.07% to settle at 6,129.60. The index touched high and low of 6,163.60 and 6,085.95 respectively. Out of the 50 stocks on the Nifty, 29 ended in the green, while 21 ended in the red.

The major gainers of the Nifty were Tata Steel up 3.52%, Ranbaxy up by 2.78%, SSLT up by 2.51%, Tata Motors up by 2.12% and Hindalco up by 2.07%. The key losers were Maruti Suzuki down by 9.36%, Axis Bank down by 3.82%, Sun Pharmaceuticals down by 2.48%, Lupin down by 2.39% and Cipla down by 1.47%. (Provisional)

The European markets were trading in green; France’s CAC 40 was up 0.74%, Germany’s DAX was up 0.70% and UK’s FTSE 100 was up 0.40%.

The Asian markets barring Hang Seng and Nikkei 225 concluded Tuesday’s trade in green as investors opted to take positions in beaten down but fundamentally strong stocks after recent sharp losses. Taiwan market is closed on account of ‘No Trading’ day. The market will open tomorrow only for Clearing & Settlement and will remain close till February 4 on account of ‘Spring Festival’ holiday. Indonesia’s rupiah bonds, the developing world’s worst performers in the past three months, are extending losses as emerging-market selloff returns just as the government ramps up debt sales before elections. The Indonesian Chamber of Commerce and Industry, the country’s premier business lobby, lowered its forecast on the nation’s economic growth this year to reflect a global slowdown. The economy probably will expand at between 5.2% and 5.8% this year, according to the organization known as Kadin, and that is lower than the government’s growth target of 5.8%.

Hong Kong saw a 3.6% rise in the value of total exports of goods in 2013 from 2012 while that for the imports of goods gained 3.8%. The value of re-exports increased by 3.8% and the value of domestic exports fell by 7.6%. A visible trade gap of HK$501 billion ($64.6 billion), equivalent to 12.3% of the value of imports of goods, was recorded in 2013. Japan’s CSPI rose to a seasonally adjusted annual rate of 1.3%, from 1.2% in the preceding month whose figure was revised up from 1.0%. Taiwanese GDP rose to 2.92%, from 1.58% in the preceding month while Thailand’s Industrial Production rose to a seasonally adjusted -6.2%, from -10.6% in the preceding month.