Benchmarks continue to hold their head above water

After positive opening, benchmarks continue to hold their head above water on sustained and selective buying by funds and retail investors ahead of RBI’s policy meet. The Reserve Bank of India is expected to keep interest rates steady at a policy review, while the tone is likely to be less dovish than at the RBI last policy meeting in June. Sentiment on the street got some support after Finance Secretary Arvind Mayaram said that though achieving fiscal deficit target of 4.1 per cent is a ‘tough task’ but the government will be able to meet it, as there are ‘clear signs’ of economy picking up, leading to buoyancy in revenue realisation. Meanwhile, stocks from Healthcare, Auto and information technology (IT) counters were supporting the markets’ uptrend, while those from Realty, Power and Capital Goods counters were adding to the underlying cautious undertone.

The Reserve Bank of India kept key rates unchanged in its policy review meet, but cut the SLR rates by 50 bps to 22%. RBI also cut the HTM ceiling to 24%.

In scrip specific development, shares of Marico have surged as much as 10% after the company reported a better-than-expected 19% year-on-year jump in consolidated net profit at Rs 185 crore for the quarter ended June 30, 2014 (Q1), on back of strong volume growth. On the other hand, shares of Petronet LNG have tanked as much as 5% after reporting a 30% year-on-year decline in net profit at Rs 157 crore for the first quarter ended June 30, 2014 (Q1), due to higher finance cost.

On global front, Asian stocks declined after a survey showed China's services sector growth fell to a record low. Further, the US markets despite losing some strength going into the close managed a close in green. Back home, The Indian rupee gained two paise to 60.91 against the US dollar in early trade at the Interbank Foreign Exchange market on increased selling of the American currency by exporters ahead of the RBI’s policy meet. The market breadth on BSE was positive, out of 2140 stocks traded, 1251 stocks advanced, while 795 stocks declined on the BSE.

The BSE Sensex is currently trading at 25767.58 up by 44.42 points or 0.17% after trading in a range of 25829.08 and 25730.70. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.20%, while Small cap index gained 0.45%.

The top gaining sectoral indices on the BSE were Healthcare up by 0.79%, Auto up by 0.57%, IT up by 0.41%, TECk up by 0.29% and Consumer Durables up by 0.23%, while Realty down by 0.48%, Power down by 0.40%, Capital Goods down by 0.32%, India Infrastructure Index down by 0.16% and Metal down by 0.05% were few losers on the sectoral index.

The top gainers on the Sensex were Sun Pharma up by 2.13%, ONGC up by 1.95%, Bajaj Auto up by 1.94%, Hindalco up by 1.18% and Mahindra & Mahindra up by 1.03%. On the flip side, HDFC down by 1.27%, Hero MotoCorp down by 1.14%, NTPC down by 0.60%, Coal India down by 0.57% and BHEL down by 0.46% were the top losers on the BSE.

Meanwhile, Reserve Bank of India (RBI) is expected to leave its key policy rates unchanged, when it reviews its monetary policy as part of its bi-monthly exercise. However, RBI governor, Raghuram Rajan could prepare ground for an easier rate regime by introducing some liquidity enhancing measures.

In the last policy review in June, the RBI retained the policy rate making it the second consecutive time that Governor Rajan kept interest rates unchanged, however the statutory liquidity ratio (SLR), the mandatory amount of bonds lenders must keep with the RBI, was cut by 0.50% to 22.5% of their net demand and time liabilities (NDTL) with effect from June 14. Meanwhile, repo rate remained unchanged at 8%, while Cash reserve ratio (CRR) also was kept unchanged at 4%.

Rajan, so far has raised interest rates three times since he took office in September 2013, even as economic growth slowed to decade-low rates as it set the target of bringing down consumer price inflation to 8% by the end of the fiscal, and to 6% by the next fiscal. As per the latest data, Consumer Price Index (CPI) eased to a 29-month low of 7.31% in June, May IIP quickened to a 19-month high of 4.7% and core sector output  rose at its fastest pace in nine months in June, hinting of economic turnaround. Despite this, RBI governor is not expected to slash rates on account of higher food inflation, which remains above the 8% mark.

Besides, India’s central bank also has clearly stated inflation fighting priority, further with the possibility of below-average monsoon, wait and watch approach by Reserve bank of India shouldn’t come as much of surprise.

The CNX Nifty is currently trading at 7,694.25 up by 10.60 points or 0.14% after trading in a range of 7,714.45 and 7,683.80. There were 24 stocks advancing against 26 declining on the index.

The top gainers of the Nifty were Bajaj-Auto up by 2.10%, Sun Pharma up by 2.01%, ONGC up by 1.91%, Ambuja Cements up by 1.61% and Grasim up by 1.39%. On the flip side, HDFC down by 1.19%, Hero MotoCorp down by 1%, Power Grid down by 0.83%, DLF down by 0.75% and Cairn down by 0.55% were the top losers on the index.

Asian markets were trading mostly in the red; Nikkei 225 tumbled by 0.29%, Hang Seng slipped 0.11%, KOSPI Index declined by 0.75%, Jakarta Composite decreased by 0.41%, Shanghai Composite dipped 0.42%, FTSE Bursa Malaysia KLCI contracted by 0.05% and Taiwan Weighted was down by 1.83%. On the flip side, Straits Times was up by 0.34%.