Volatility led the markets make a flat closing; Nifty manages a green ending

Volatility lingered for yet another session on Wednesday and the Indian markets kept moving in and out of the red zone throughout the day despite good global lead. Traders amid the disappointment of RBI keeping its policy rates unchanged, even overlooked the report that activity in India’s services sector expanded at its fastest pace in five months, mainly driven by new order flows. The HSBC Services Purchasing Managers’ Index (PMI) rose to 52.6 in the month of november, compared with 50 in October. The reading in November, however was below the series average and sentiment remained subdued, especially with the decline seen in hiring.

The global markets though showed mostly a positive trend and most of the Asian markets managed a green close with China’s Shanghai Composite Index closing at a three-year high as the value of trading surged to a record. The European markets too made a positive start, as investors weighed the prospects for expanded stimulus from the European Central Bank. Draghi and his ECB colleagues will meet tomorrow in Frankfurt to discuss monetary policy.

Back home, it was a day for the broader markets and they remained buzzing throughout the day, outperforming the benchmarks with quiet a margin. Markets in early deals showed signs of recovery, as buying emerged from domestic as well as foreign investors on positive global cues. But in the latter trade there was intermittent selling that kept dragging markets lower, countering the buying attempt. There was some upmove in the second half supported by a report that the government has set up an Inter-Ministerial Committee to fast-track investment proposals from US in India. The Committee is meant to identify bottlenecks faced by the US investors in the implementation of their investment proposals and address them in consultation with all other agencies and state governments concerned. Back on the street, it was the drag in the tech and IT stocks that led a flat closing of the markets, otherwise the rate sensitives like auto, reality and banks surged on value buying and on hopes of a big rate cut by the RBI early next year. Realty also got the advantage of government’s announcement of easing foreign direct investment rules for the construction sector. Meanwhile, the Reserve Bank of India kept key interest rates unchanged on Tuesday but hinted at a possible cut early next year if inflation remained subdued and the government controlled the fiscal deficit. There is wide expectations that though RBI may not have cut rates this time it may go big while cutting rate in March-April next year and may even reduce rates by 50 bps at one stroke. IT stocks were under pressure due to sharp depreciation of major global currencies against the dollar. In non sectoral gauge some upmove was seen in companies related to insurance business on reports that the Insurance Bill might be passed in the current session of Parliament, as the main opposition Congress may support the bill. Max India surged by 7%, while Reliance Capital gained around 4%.

Finally, the BSE Sensex ended tad lower by 1.30 points, to 28442.71, while the CNX Nifty added 12.95 points or 0.15% to 8,537.65.

The BSE Sensex touched a high and a low of 28504.65 and 28370.73, respectively. The BSE Mid cap index was up by 1.39%, while the Small cap index surged by 1.64%.

The top gainers on the Sensex were ONGC up by 2.98%, BHEL up by 2.50%, NTPC up by 1.67%, Mahindra & Mahindra up by 1.57% and Hindustan Unilever up by 1.55%. On the flip side, Dr. Reddys Lab down by 2.43%, HDFC down by 1.83%, Bharti Airtel down by 1.72%, Hindalco down by 1.49% and HDFC Bank down by 1.09% were the top losers.

On the BSE Sectoral front Auto up by 1.34%, Realty up by 1.32%, Power up by 1.06%, Oil & Gas up by 0.99% and Capital Goods up by 0.96% were the top gainers, while IT down by 0.19% and TECK down by 0.16% were the only losers in the space.

Meanwhile, with Reserve Bank of India (RBI) keeping interest rates unchanged, Finance Minister has stated that RBI has taken note of the structural change in the outlook for inflation. The ministry is further looking forward to the central bank to support revival of growth and employment.

In line with general expectations, the RBI, in the fifth Bi-Monthly Monetary Policy review, 2014-15, kept the key policy rate unchanged at 8.0 per cent. Similarly the cash reserve ratio (CRR) of scheduled banks was kept unchanged at 4.0 per cent of NDTL. Consequently, the reverse repo rate under the under the liquidity adjustment facility (LAF) will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate will stand at 9.0 per cent.

Referring to the proposed new monetary policy framework, Finance Ministry stressed that the Government and RBI will work towards a monetary policy framework that will help institutionalize the gains achieved on the inflation front, so as to reduce inflationary expectations and further support the revival of investment and growth. Further, the new monetary policy framework involves setting of a formal inflation target and accountability to deliver on inflation front. The RBI has set the CPI inflation target at 6% by January 2015.

The CNX Nifty touched a high and low of 8,546.95 and 8,508.35 respectively.

The top gainers on Nifty were Jindal Steel & Power up by 7.85%, ONGC up by 3.47%, CIPLA up by 3.20%, BHEL up by 2.78% and Asian Paints up by 2.45%. On the flip side, Dr. Reddy's Laboratories down by 2.38%, HDFC down by 1.81%, ZEEL down by 1.69%, Bharti Airtel down by 1.52% and Hindalco Industries down by 1.43% were the top losers.

Most of European markets were trading in green, France’s CAC 40 was up by 0.20% and Germany’s DAX was up by 0.29%, while United Kingdom’s FTSE 100 was down by 0.04%.

Asian markets ended mixed on Wednesday with some of the regional indices rallying following slew of impressive US data that helped the dollar march towards the 120-yen mark for the first time in seven years. Chinese shares rose, led by brokerages and property developers, as investors bet on further stimulus from the central bank. China’s bonds extended declines after the government sold debt at a higher yield than analysts forecast, a sign of weakening demand for the securities. The growth in China's services sector quickened in November, easing concerns about the economic recovery after recent sluggish manufacturing data. The Japanese stocks market rose on a weaker yen and fairly strong sales data from automakers.