Benchmarks trade in red ahead of RBI’s monetary policy announcement

After posting gains in last a couple of days, Indian equity markets are trading in red in early deals on Tuesday with the loss of around half a percent, which dragged both Sensex and Nifty below psychologically crucial 28,100 and 8,550 levels respectively, on account of weak global cues. Cautiousness is prevailing in the markets ahead of the Reserve Bank of India’s (RBI) monetary policy review due later in the day, though the general expectation is that RBI will keep interest rates unchanged and governor Rajan is not likely to oblige the markets too soon. Rupee opened lower against the dollar on Tuesday and was trading at 64.09, down 5 paise at the Interbank Foreign Exchange that too kept pressurizing the sentiment. There was some worries in the market with the India Meteorological Department (IMD) reports that India’s southwest monsoon in the remaining two months of the four-month season, that is in August and September, is expected to be below normal at 84 per cent of the long-period average (LPA).

In scrip specific development, Hero MotoCorp  was trading higher after the country’s largest two-wheeler player reported a 33 per cent surge in net profit to Rs 750 crore for the quarter against Rs 563 crore in the corresponding quarter last year on the back of higher-than-expected margins.

On the global front, the US markets closed lower on Monday as falling oil prices dragged energy shares to a three-year low. Asian markets too were trading mostly in red, on weak cues overnight from Wall Street and disappointing manufacturing data from China.

Back home traders were seen piling up position in Metal, Realty, Oil & Gas and Auto, selling was witnessed in Consumer Durables, Bankex, FMCG, INFRA and IT. The market breadth on BSE was positive in the ratio of 1017: 772 while 60 scrips remained unchanged.

The BSE Sensex is currently trading at 28071.90, down by 115.16 points or 0.41% after trading in a range of 28053.75 and 28264.72. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.21%, while Small cap index was down by 0.03%.

The gaining sectoral indices on the BSE were Metal up by 0.73%, Realty up by 0.16%, Oil & Gas up by 0.13% and Auto up by 0.09%, while Consumer Durables down by 0.55%, Bankex down by 0.49%, FMCG down by 0.41%, INFRA down by 0.37% and IT down by 0.36% were the losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 2.53%, Tata Steel up by 1.65%, Hindalco up by 1.42%, Bharti Airtel up by 0.92% and Vedanta up by 0.63%. On the flip side, Tata Motors down by 1.38%, Wipro down by 1.22%, ITC down by 1.12%, Infosys down by 1.04% and GAIL India down by 1.00% were the top losers.

Meanwhile, amid growing voices from India Inc for a rate cut because of low wholesale inflation and slowdown in industrial growth, Reserve Bank of India (RBI) will be announcing its Third Bi-monthly Monetary Policy Review, 2015-16. Though there is wide expectation that RBI will keep interest rates unchanged at its policy review, but still there are hopes of another rate cut. During the calender year, RBI has reduced the rate thrice by 0.75 percent. It was cut by 0.25 percent each in January, March and June.

Research firm Moody’s Analytics, a division of Moody’s Corporation, which is engaged in economic research and analysis has said that the Reserve Bank is likely to cut the benchmark rate by 0.25 per cent in its monetary policy review, as inflation is likely to remain subdued on the back of average rainfall and lower commodity prices. On the demand side, though it cautioned that the economic engine has yet to fully fire without key reforms. Thus, private investment has remained on the sidelines.

In its report the firm has said that dim forecasts of below-average rains have not come to fruition and rainfalls have been closer to the long-term average with encouraging signs for kharif crop sowing. Monsoon rainfall has picked up in July and the pace is likely to continue in August.

Moody’s Analytics also said that recent global developments also suggest limits to inflation pressure, with the tumbling of global commodity prices, particularly crude oil, on the back of the Iran nuclear deal. This would help ease RBI's concerns of rising fuel costs. Overall, the subdued inflation profile suggests RBI should lower rates and focus on economic growth.

The CNX Nifty is currently trading at 8507.80, down by 35.25 points or 0.41% after trading in a range of 8502.25 and 8565.15. There were 16 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were Hero MotoCorp up by 2.52% and BPCL up by 2.21% and Tata Steel up by 1.63% and Hindalco up by 1.61% and Asian Paints up by 1.56%. On the flip side, Bosch down by 1.65%, Cairn India down by 1.52%, Indusind Bank down by 1.48%, Tata Motors down by 1.44% and Bank Of Baroda down by 1.35% were the top losers.

Asian markets were trading Mostly in red; Taiwan Weighted decreased 28.44 points or 0.33% to 8,495.97, Hang Seng decreased 22.11 points or 0.09% to 24,389.31, FTSE Bursa Malaysia KLCI decreased 17.68 points or 1.01% to 1,726.51, Nikkei 225 decreased 15.06 points or 0.07% to 20,533.05, Jakarta Composite decreased 14.1 points or 0.29% to 4,786.09 and Straits Times decreased 4.52 points or 0.14% to 3,188.27.

On the flip side, KOSPI Index increased 7.75 points or 0.39% to 2,016.24 and Shanghai Composite increased 48.59 points or 1.34% to 3,671.49.