Benchmarks add gains; RBI keeps key rates unchanged

Indian equity markets added gains to continue their trade in green in the late afternoon session on account of buying in frontline blue chip counters. The sentiments turned optimistic after the central bank in his fourth bi-monthly credit policy review maintained its hawkish tone in determining the inflation trajectory going forward. RBI kept the key repo rate unchanged at 8% citing significant upside risk to its medium term inflation target. The RBI’s move was widely expected as Governor Raghuram Rajan has vowed to bring consumer price inflation down to 8% by January 2015 and to 6% a year later. Traders were seen piling positions in Consumer Durables, Capital Goods and Auto while selling was witnessed in IT, TECK and Power sector stocks. In scrip specific development, VA Tech Wabag, engaged in waste water treatment, was trading firm touching all-time high after foreign brokerage firm initiated the stock as outperformer raising target price. SREI Infrastructure Finance was trading in green after the infrastructure financing company decided to raise Rs 1,500 crore in one or more tranches through public issue of secured, redeemable, non-convertible debentures (NCDs).

On the global front, the Asian markets were trading on a mixed note. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 7,950 and 26,600 levels respectively. The market breadth on BSE was positive in the ratio of 1438:980 while 99 scrips remained unchanged.

The BSE Sensex is currently trading at 26659.01, up by 61.90 points or 0.23% after trading in a range of 26547.44 and 26737.36. 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 0.73%, while Small cap index up by 0.66%.

The gaining sectoral indices on the BSE were Consumer Durables up by 2.21%, Capital Goods up by 1.21%, Auto up by 1.01%, PSU up by 0.41%, Bankex up by 0.27% while, IT down by 0.69%, TECK down by 0.43%, Power down by 0.23% were the losing indices on BSE.

The top gainers on the Sensex were HDFC up by 2.23%, Bajaj Auto up by 1.81%, Larsen & Toubro up by 1.67%, Sun Pharma up by 1.65% and Maruti Suzuki up by 1.39%.On the flip side, Infosys down by 0.96%, Hindalco down by 0.94%, TCS down by 0.92%, Axis Bank down by 0.83% and Hindustan Unilever down by 0.62% were the top losers.

Meanwhile, in a bid to maintain financial and price stability, the Reserve Bank of India (RBI), in its fourth bi-monthly monetary policy review, as widely expected, kept its key policy repo rate unchanged at 8%. Consequent to which the reverse repo rate under the LAF stood unchanged at 7.0%, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0% respectively.

India’s apex bank also kept both the statutory liquidity ratio (SLR) and the cash reserve ratio (CRR) unchanged. However, it underscored that it would cut the ceiling on bonds that must be held-to-maturity from the current 24% to 22% in stages starting in the bi-weekly cycle beginning in January 10, 2015 and expects to complete the process by September 2015.

Further, it also reduced the liquidity provided under the export credit refinance (ECR) facility from 32% of eligible export credit outstanding to 15% with effect from October 10, 2014 and decided to continue to provide liquidity under overnight repos at 0.25% of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75% of NDTL of the banking system through auctions.

In its policy stance and rationale, it expressed upside risk to its target to bring consumer inflation down to 6% by January 2016, which continued to warrant policy preparedness to contain pressures if the risks materialized. However, the central bank highlighted that its immediate target in containing the consumer price index (CPI) inflation at 8% by January 2015, looked achievable. Additionally, it also retained growth projection for current fiscal at 5.5% and said that future policy stance will be influenced by inflation outlook.

Notably, the repo rate has been unchanged since January, when the RBI increased it by a quarter percentage point. So far, Rajan has hiked the rates thrice since assuming charge as the Governor in September last year.

The CNX Nifty is currently trading at 7979.30, up by 20.40 points or 0.26% after trading in a range of 7943.75 and 7999.10. There were 28 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 2.29%, HDFC up by 2.26%, Kotak Mahindra Bank up by 2.06%, Bajaj Auto up by 1.80% and Larsen & Toubro up by 1.63%. On the flip side, Power Grid Corporation down by 1.76%, Hindalco down by 1.10%, DLF down by 1.01%, Tech Mahindra down by 0.87% and Infosys down by 0.86% were the top losers.

The Asian markets were trading on a mixed note; Shanghai Composite increased 0.95 points or 0.04% to 2,358.66, Taiwan Weighted increased 6.16 points or 0.07% to 8,966.92, FTSE Bursa Malaysia KLCI increased 6.22 points or 0.34% to 1,852.56 and Jakarta Composite increased 7.64 points or 0.15% to 5,149.65.

On the other hand, Hang Seng decreased 318.77 points or 1.37% to 22,910.44, Nikkei 225 decreased 137.12 points or 0.84% to 16,173.52, Straits Times decreased 24.9 points or 0.76% to 3,264.82 and KOSPI Index decreased 6.51 points or 0.32% to 2,020.09.