Post Session: Quick Review

Weighed down by interest rate-sensitive stocks after the central bank’s status quo stance, local equity markets capitulated to selling pressure for a third straight session on Tuesday, which dragged both Sensex and Nifty below psychologically crucial 29,100 and 8,800 levels respectively, with losses of around half a percent. Although, RBI’s status quo stance was much on expected lines, but lack of clarity on when Interest could be reduced by India’s central bank disappointed market-participants, who for yet another session booked profits. In its policy stance and Rationale, RBI pointed that the key to further easing would be data confirming continuality of disinflationary pressures along with sustained high quality fiscal consolidation. Further, it underscored that in absence of any substantial new developments on the disinflationary process or on the fiscal outlook since January 15, it was appropriate for RBI to await and maintain the current interest rate stance.

Sentiment also took a hit after the index of eight core sectors, which contribute to 38% of the industrial production slowed to three month low of 2.4% in December from 6.7% in November 2014. Major drag came from slowdown in steel output, which occupies 6.88% in the overall index. The index declined by 2.4% in December, 2014. Its cumulative index during April to December, 2014-15 increased by 1.6% over the corresponding period of previous year. Besides, disappointing earnings also weighed on the sentiment. Shares of Punjab National Bank tanked over 7% after the bank’s gross NPAs as a percentage to total advances rose to 5.97% from 4.96% in the same quarter an year ago. Meanwhile, the country's second largest public sector bank by assets had reported net profit of Rs 755.41 crore for the October- December quarter of the 2013-14 financial year. Additionally, Lupin also concluded with a cut of over half a percent after drug maker registered a fall of 3.76% in its net profit after tax at Rs 513.3 crore for the quarter under review as compared to Rs 533.38 crore for the same quarter in the previous year. However, the group on consolidated basis, reported a 26.32% growth in its consolidated net profit at Rs. 601.45 crore for the quarter ended December 2014 on account of robust sales and improved operational efficiencies. Besides, daunting global set-up also added to the pessimistic environment.

On the global front, Asian shares soared on Tuesday as hopes for an agreement on Greece's debt situation and a sharp rebound in oil prices lifted risk appetite. Sentiments were bolstered after Greece's new finance minister underscored about a proposal to swap his country's outstanding debt for new growth-linked bonds, hopefully ending a standoff with its international creditors.

Closer home, despite the subdued trend of markets, most of the sectoral indices on BSE concluded into positive territory, however leading the gainer’s list were stocks from Oil & Gas, Fast Moving Consumer Goods (FMCG) and Metal counters. On the flip side, massive drubbing was witnessed by stocks from banking, Realty and Infrastructure counters, which were the prominent losers of the session.  While, banking and realty stocks declined on no rate cut stance by RBI, Auto stocks slid for yet another session after reporting their monthly sales figures. The overall market breadth on BSE was in the favour of decliners, which thumped advances in the ratio of 1332:1530, while 119 shares remained unchanged (Provisional).

The BSE Sensex ended at 29000.14, down by 122.13 points or 0.42% after trading in a range of 28900.41 and 29253.06. There were 13 stocks advancing against 17 stocks declining on the index. (Provisional)

The broader indices ended in the red; the BSE Mid cap index was down by 0.29%, while Small cap index down by 0.26%. (Provisional)

The gaining sectoral indices on the BSE were Oil & Gas up by 1.99%, FMCG up by 1.06%, Metal up by 0.80%, Consumer Durables up by 0.50% and TECK up by 0.39% while, Bankex down by 2.61%, Realty down by 1.43%, Infrastructure down by 0.92%, Healthcare down by 0.87% and Power down by 0.68%, were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Sesa Sterlite up by 5.95%, Bharti Airtel up by 3.74%, Reliance Industries up by 3.21%, ONGC up by 2.57% and TCS up by 1.84%. On the flip side, Axis Bank down by 5.10%, Tata Power down by 3.84%, Bajaj Auto down by 3.73%, Mahindra & Mahindra down by 3.32% and SBI down by 2.70% were the top losers. (Provisional)

Meanwhile, having cut policy interest rate just three weeks outside the monetary policy review, Reserve Bank of India (RBI) is expected to hold rates steady at sixth bi-monthly monetary policy review later on Tuesday, awaiting for budget cues in order to gauge mainly government's ability to reduce country's fiscal deficit, before initiating any further rate cuts.

In a big surprise move, the Reserve Bank of India (RBI) in mid-Jan slashed repo rate by 25 basis points to 7.75%. Consequently, the reverse repo rate under the LAF stood adjusted to 6.75% and the marginal standing facility (MSF) rate, determined at a spread of 100 basis points above repo rate, stood at 8.75%, while bank rate also remained at 8.75%. The RBI move came as inflation has declined significantly over the recent months below the RBI set target of 8% by January 2015.

However, this time around, India's central bank is unlikely to join central banks across the world in further easing monetary policy. The European Central Bank and counterparts in Canada and Singapore have been among those to loosen policy of late although Japan has put its quantitative and qualitative easing on hold for now over concerns that its currency may plunge too far.

With inflation monster now under its control, RBI, would want to look at the government's fiscal roadmap and the quality of its fiscal consolidation plan, before losing its monetary policy stance. The plunge in global crude prices and bigger-than-expected falls in domestic vegetable and fruit prices have led to the inflation easing sharply. In a bit of worrying development, India's fiscal deficit crossed the full-year budget estimate at the end of December.

According to the data released by the Controller General (CGA) of Accounts, fiscal deficit at the end of December at Rs 5.32 lakh crore was 100.2% of the budget estimate for the full fiscal year.

India VIX, a gauge for markets short term expectation of volatility declined 2.92% at 19.80 from its previous close of 20.40 on Monday. (Provisional)

The CNX Nifty ended at 8756.55, down by 40.85 points or 0.46% after trading in a range of 8726.65 and 8837.30. There were 22 stocks advancing against 28 stocks declining on the index. (Provisional)

The top gainers on Nifty were Sesa Sterlite up by 6.31%, Cairn India up by 4.09%, Bharti Airtel up by 3.41%, Reliance Industries up by 3.25% and ONGC up by 2.74%. On the flip side, PNB down by 7.79%, Axis Bank down by 4.97%, Tata Power down by 4.17%, Bajaj Auto down by 3.77% and Kotak Mahindra Bank down by 3.41% were the top losers. (Provisional)

European Markets were trading in the green; UK's FTSE 100 was up by 1.13%, France's CAC was up by 1.26% and Germany's DAX was up by 1.14%.

The Asian equity benchmarks ended mostly in green on Tuesday, with Chinese stocks rising on hopes for fresh economy-boosting measures by its leaders. The People’s Bank of China is using its official guidance rate to put a floor under the yuan, a move that suggests Beijing is worried enough about mounting capital outflows to resume intervention in the forex market. The new strategy - or more accurately, the return to an old one - represents a step back from Beijing’s repeated commitments to meddle less in the foreign exchange market, but the central bank lacks attractive alternatives. Indonesia’s trade deficit narrowed by more than half last year, bolstering confidence that trade would present less headwinds to the country’s economic rebound on the back of government spending and investment this year. The country booked $1.8 billion trade deficit in the January to December period last year due to a persistently poor performance of the oil and gas industry. Indonesian Trade Balance rose to a seasonally adjusted 0.19B, from -0.42B in the preceding month.