Benchmarks eke out slender gains

Indian equity benchmarks ended the volatile day of trade slightly in the green on Tuesday as investors shrugged off Reserve Bank of India’s (RBI) neutral stance on key policy rates. Though, markets rose in a knee jerk reaction to the release of monetary policy, but all the gains were erased after central bank, in its monetary policy review said upside risks to its January 2016 inflation target of 6% are significant and its future policy stance will be influenced by this inflation target. Nevertheless, market managed to keep their head above water supported by bargain buying in dying hours of trade.

Markets got some support after Finance Secretary Arvind Mayaram suggested that the economic conditions were becoming favourable for cut in interest rates. Investors also got some confidence after Prime Minister Narendra Modi pitched for investments from some of the largest American corporations with the promise of a stable tax policy and an assertion that he wants to convert the Supreme Court ruling on coal block allocation into an opportunity to move forward and ‘clean up the past’. Meanwhile, RBI after its fourth bi-monthly monetary policy review kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8% and the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL). It has reduced the liquidity provided under the export credit refinance (ECR) facility from 32% of eligible export credit outstanding to 15% with effect from 10 October 2014.

On the global front, European markets were trading mixed in early deals with CAC and DAX trading with marginal gains while FTSE was trading tad lower. Asian markets ended mostly in the red led by Hang Seng which continued to decline and ended down by over a percent, its lowest in three months, because of the civil unrest in Hong Kong. Japanese Nikkei was also remained lower by around a percent after weak economic data and a profit warning from Sumitomo Corp dampened sentiment.

Jewellery stocks too edged higher, driven by rising demand supported by festive season. Additionally, tyre makers viz. Ceat, MRF, J K Tyre, TVS Srichakra, Apollo Tyres, Goodyear India, Falcon Tyres and Dunlop India all edged higher on hopes of higher margins due to falling rubber prices. On the flip side, auto shares remained under pressure ahead of the release of September sales numbers from tomorrow.

The NSE’s 50-share broadly followed index Nifty edged higher by around six points and managed to hold the psychological 7,950 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by over thirty points to regain its psychological 26,600 mark. Broader markets traded with traction and ended the session slightly in the green. The market breadth remained in favour of decliners, as there were 1,347 shares on the gaining side against 1,539 shares on the losing side, while 105 shares remained unchanged.

Finally, the BSE Sensex gained 33.40 points or 0.13%, to 26630.51, while the CNX Nifty added 5.90 points or 0.07% to 7,964.80.

The BSE Sensex touched a high and a low of 26851.33 and 26481.31, respectively. The BSE Mid cap index was up by 0.14%, while the Small cap index gained 0.13%.

The top gainers on the Sensex were Sun Pharma up by 2.77%, HDFC up by 2.17%, Bajaj Auto up by 2.00%, Maruti Suzuki up by 1.85% and Cipla up by 1.59%. On the flip side, BHEL down by 2.85%, Axis Bank down by 2.18%, Hindalco down by 1.69%, Mahindra & Mahindra down by 1.62% and Tata Motors down by 1.57% were the top losers in the index.

On the BSE Sectoral front Consumer Durables up by 1.75%, Healthcare up by 1.35%, Oil & Gas up by 1.14% and FMCG up by 0.66% were the only gainers, while Realty down by 2.66%, Power down by 1.22%, Metal down by 0.96%, Capital Goods down by 0.58%, Infrastructure down by 0.57% were the top losers in the space.

Meanwhile, Finance Secretary Arvind Mayaram, a day ahead of the Reserve Bank of India’s (RBI) fourth bimonthly policy review has batted for an interest rates cut, saying that the economic conditions were becoming favourable for a more benign monetary policy going forward in this year.

Mayaram opined that the wholesale price (WPI) inflation is at the lowest level since October, 2009 and retail inflation (CPI) is less than 8 percent which is the target for this year by an RBI panel report. However, RBI governor had earlier stated that the real problem is inflation that is persistent. “We have been emphasising again and again in order to break the back of inflation, we got to break this persistence. Once we do it, we can then be much more comfortable”.

Although, the RBI left key interest rates unchanged in its third bi-monthly monetary policy review early August, saying near-term tightening is not expected if inflation continues to ease and is highly unlikely that at its fourth bimonthly policy review the apex bank will cut interest rates, with still persisting high inflation. RBI has set a target for CPI inflation at 8 per cent by January 15 and 6 per cent by January 2016 and the CPI based retail inflation eased to 7.8 per cent in August.

The Finance Secretary while exuding confidence that Indian economy will clock a growth rate in the range of 5.7 to 5.9 percent during the current fiscal year 2014-15, said that Current Account Deficit(CAD) has been brought down substantially and this has also been acknowledged as of the key credit strength by S&P in its recent report.

The CNX Nifty touched a high and low of 8,030.90 and 7,923.85 respectively.

The top gainers of the Nifty were Zee Entertainment Enterprises up by 3.49%, BPCL up by 3.22%, Sun Pharmaceuticals Industries up by 2.42%, HDFC up by 2.17% and Maruti Suzuki India up by 1.74%. On the other hand, DLF down by 5.05%, BHEL down by 4.24%, Power Grid Corporation of India down by 3.12%, IDFC down by 2.38% and ACC down by 2.33% were the top losers.

Most of European markets were trading in green, France’s CAC 40 was up by 1.01% and Germany’s DAX was up by 0.52%, while United Kingdom’s FTSE 100 was down by 0.09%.

Asian markets ended mostly in red on Tuesday, with the benchmark index heading for its biggest monthly decline since May 2012, amid heightened unrest in Hong Kong and speculation over the timing of US interest-rate increases. Indonesia’s rupiah fell the most in Asia this month as foreign funds pulled money from local stocks in preparation for an increase in US interest rates. China’s vast factory sector showed signs of steadying in September as export orders climbed, easing fears of a hard landing but pointing to a still-sluggish economy facing considerable risks. The final HSBC/Markit Manufacturing Purchasing Managers’ Index(PMI) hovered at 50.2 in September, unchanged from the August reading which was a three-month low, but lower than a preliminary reading of 50.5. A sub-index measuring new export orders, a gauge of external demand, expanded to a 4-1/2-year-high of 54.5, though domestic demand appeared soft.

Japan’s retail sales rose to a seasonally adjusted annual rate of 1.2%, from 0.5% in the preceding month while Japan’s industrial production fell to a seasonally adjusted -1.5%, from 0.4% in the preceding month. The total work force that is unemployed and actively seeking employment in Japan during the previous month fell to a seasonally adjusted 3.5%, from 3.8% in the preceding month. Japanese Household Spending rose to a seasonally adjusted -4.7%, from -5.9% in the preceding month while Japanese Housing Starts rose to a seasonally adjusted -12.5%, from -14.1% in the preceding quarter. Thai Industrial Production rose to a seasonally adjusted -2.7%, from -5.3% in the preceding month whose figure was revised down from -5.2%.