Markets slump widen with RBI keeping rates unchanged

Market cuts have widened in the afternoon session of trade after the RBI maintained status quo in its fifth Bi-Monthly Monetary Policy review, 2014-15, dashing any hopes of early rate cuts as a surprise. The governor though said that he won’t hold rates for longer than needed but also said that change in monetary policy stance at the current juncture is premature. Not only the banking but other rate sensitives’ like auto and consumer durables were dragging the markets lower in knee-jerk reaction to the policy announcements. Auto stocks were additionally under pressure on reports that the government plans to make crash tests mandatory for cars once the test facilities are made available in the country. Minister of State for Road Transport and Highways has revealed the government plans to mandate the offset frontal and side impact crash tests for passenger cars. Automobile industry has been avoiding some safety features arguing cost factor. Back on street, the rupee strength was weighing down the IT and tech stocks, while the broader indices were showing mixed trend.

The BSE Sensex is currently trading at 28444.17, down by 115.45 points or 0.40% after trading in a range of 28386.46 and 28576.39. There were 14 stocks advancing against 15 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.26%, while Small cap index was down by 0.13%.

The gaining sectoral indices on the BSE were Metal up by 0.76%, Capital Goods up by 0.51%, FMCG up by 0.26%, Oil & Gas up by 0.20%, Power up by 0.13% while, Auto down by 1.14%, IT down by 0.98%, TECK down by 0.62%, Consumer Durables down by 0.47%, Realty down by 0.39% were the losing indices on BSE.

The top gainers on the Sensex were Sesa Sterlite up by 1.65%, Bharti Airtel up by 1.15%, Tata Steel up by 0.89%, Hindalco up by 0.87% and Larsen & Toubro up by 0.82%. On the flip side, Mahindra & Mahindra down by 2.69%, Infosys down by 2.09%, HDFC down by 1.77%, Bajaj Auto down by 1.53% and Tata Motors down by 1.33% were the top losers.

Meanwhile, with an aim to boost power generation capacity of India, the Heavy Industry Ministry pitched for doubling the basic import duty on power generation equipment. The Ministry demanded that duty to be raised to 10 per cent from 5 per cent and the countervailing duty to be brought to nil.

In 2012, the previous government had ended the difference on basic import duty between power projects, underscoring that the same rate of duty would apply to all projects in the sector, irrespective of capacity. After that, electricity generation equipment for mega power projects / ultra mega power projects of 1,000 MW and above also attracted duty. The duty imposed was 5 per cent basic Customs duty, 12 per cent countervailing duty (CVD) and 4 per cent special additional duty (SAD) taking the duty to 21 per cent. In addition to this, there was education cess and the final rate stood at 22.85 per cent.

The Ministry is of the view that if the basic import duty is raised to 10 per cent, and the countervailing duty brought to ‘nil’, domestic manufacturers will get effective protection, in comparison with foreign manufacturers. Besides import duty, all other taxes and charges are paid by both foreign and domestic manufacturers. If CVD is nil, domestic companies will not be required to pay excise duty, thus raising the effective protection from current around 4.7 per cent. Further, the ministry also highlighted the need to exempt more power projects from paying higher duty as they accounted for the bulk of power generation capacity to be added during the 12th Plan period.

The CNX Nifty is currently trading at 8524.60, down by 31.30 points or 0.37% after trading in a range of 8504.65 and 8560.20. There were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Jindal Steel & Power up by 3.68%, NMDC up by 2.19%, Cairn India up by 1.97%, Sesa Sterlite up by 1.63% and Tata Steel up by 1.25%. On the flip side, Asian Paints down by 3.21%, Mahindra & Mahindra down by 2.63%, BPCL down by 2.28%, Infosys down by 2.15% and HDFC down by 1.64% were the top losers.

Asian markets were trading mostly in green, KOSPI Index was tad higher by 0.61 points or 0.03% to 1,965.83, Straits Times gained 23.1 points or 0.7% to 3,328.74, Jakarta Composite was higher by 28.18 points or 0.55% to 5,192.47, Nikkei 225 was up by 73.12 points or 0.42% to 17,663.22, Shanghai Composite was up by 77.67 points or 2.9% to 2,757.82, Hang Seng surged by 345.18 points or 1.48% to 23,712.63. On the other hand, Taiwan Weighted lost 82.92 points or 0.91% to 9,034.79, while the FTSE Bursa Malaysia KLCI was down by 1.36 points or 0.08% to 1,776.91.