Markets continue to trade in narrow band with positive bias

Indian equity bourses continue to trade in tight band with key gauges managed to keep their head above water in early noon session on account of value-buying in select blue-chips counters amid positive cues from the Asian markets. Besides, short-covering ahead of June derivatives expiry on Thursday gave the upside some traction. Some support also came after finance ministry announced that it has initiated the process of constituting a monetary policy committee (MPC), bringing into force the relevant amendments in the Reserve Bank of India (RBI) Act from Monday. However, gains remained capped with rating agency Crisil stating that the Brexit is unlikely to have a notable impact on India's GDP growth this fiscal, even though it will impact sectors like auto and information technology. On the global front, Asian markets were trading mostly in green, despite the U.K.’s decision to leave the European Union continued to unnerve investors.

The BSE Sensex is currently trading at 26451.93, up by 48.97 points or 0.19% after trading in a range of 26378.46 and 26490.31. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.27%, while Small cap index up by 0.66%.

The top gaining sectoral indices on the BSE were Capital Goods up by 0.95%, FMCG up by 0.89%, Oil & Gas up by 0.54%, PSU up by 0.43% and Metal up by 0.43%, while IT down by 0.53%, TECK down by 0.23%, Realty down by 0.12% and Auto down by 0.01% were the few losing indices on BSE.

The top gainers on the Sensex were Lupin up by 2.23%, Hindustan Unilever up by 2.08%, Bharti Airtel up by 1.31%, Larsen & Toubro up by 1.19% and ITC up by 1.17%. On the flip side, Tata Motors down by 2.05%, GAIL India down by 1.00%, NTPC down by 0.97%, Wipro down by 0.86% and ICICI Bank down by 0.79% were the top losers.

Meanwhile, the government has finally initiated the process of setting up a new monetary policy committee after it notified key amendments to a law governing the Reserve Bank of India. The finance ministry has stated that “The government has decided to bring the provisions of the amended RBI Act regarding constitution of MPC into force on 27 June 2016 so that statutory basis of MPC is made effective.”

The finance ministry has said that according to the monetary policy framework, agreed by RBI and the government last year, the central bank will look to contain inflation within a band of 4% plus/minus 2 percentage points from next year. Under the changes, passed by parliament last month, a six-member monetary policy council will set interest rates by majority, with a casting vote for the central bank governor in the event of a tie. It further stated that a Committee-based approach will add lot of value and transparency to monetary policy decisions.

Out of the six Members of MPC, three Members will be from the Reserve Bank of India, including the Governor, who will be the ex-officio Chairperson, the Deputy Governor, RBI and one officer of RBI. The other three Members of MPC will be appointed by the Central Government, on the recommendations of a Search-cum-Selection Committee, which will be headed by the Cabinet Secretary. These three Members of MPC will be experts in the field of economics or banking or finance or monetary policy and will be appointed for a period of 4 years and shall not be eligible for re-appointment. The meetings of the MPC shall be held at least 4 times a year and it shall publicise its decisions after each such meeting.

The government has notified the rules for the procedure for election of members of MPC and what will constitute a failure to meet inflation target under the MPC framework. As per rules, no member of MPC should have any financial or other interest that prejudicially affects his functions as a member. Also, it would be considered that every six months, RBI will publish the policy report explaining sources of inflation and its forecast for 6-18 months .If the panel failed to meet the inflation target, it shall give reasons in the report thereof, remedial actions as well as estimated time within which the target will be achieved.

The CNX Nifty is currently trading at 8107.55, up by 12.85 points or 0.16% after trading in a range of 8086.85 and 8124.90. There were 29 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were Idea Cellular up by 3.74%, Hindustan Unilever up by 2.21%, Lupin up by 2.17%, Bharti Infratel up by 1.85% and Eicher Motors up by 1.83%. On the flip side, Tata Motors - DVR down by 2.18%, Tata Motors down by 2.15%, Zee Entertainment down by 1.19%, Yes Bank down by 1.18% and NTPC down by 1.14% were the top losers.

Asian markets were trading mostly in green; KOSPI Index increased 9.37 points or 0.49% to 1,936.22, Jakarta Composite increased 26.5 points or 0.55% to 4,862.56, Nikkei 225 increased 44.87 points or 0.29% to 15,354.08 and Taiwan Weighted increased 46.64 points or 0.55% to 8,505.51, while Hang Seng decreased 148.79 points or 0.74% to 20,078.51, Shanghai Composite decreased 4.07 points or 0.14% to 2,891.63 and FTSE Bursa Malaysia KLCI decreased 1.1 points or 0.07% to 1,628.42.