Sensex cools from day’s highs; cues from European markets support

Stock markets in India are gradually edging up in Tuesday afternoon trades after the sharp freefall they suffered from the high point of the day. The frontline equity indices are trading with around half a percent gains around the psychological 17,200 (Sensex) and 5,250 (Nifty) levels. The stock markets showed a kneejerk reaction to the higher than expected rate cut by Indian central bank as the benchmarks spurted to the day’s high levels within seconds. This was RBI’s first interest rate reduction in three years and the move is likely to spur growth that has slowed markedly due to relentless monetary tightening. However, the key gauges could not sustain the gains and pared most of them since they grew concerned over the language of RBI which suggested that there may be no more rate increases, causing a bit of disappointment. The rate cut has come in the backdrop of lower than expected growth in industrial production and slight moderation in March WPI inflation, however concerns remained that the inflationary pressure would reignite due to volatile international crude oil prices and the depreciating Indian rupee. Meanwhile, the Indian markets even went on to outperform all its Asian peers which traded on a pessimistic note as the optimism over better than expected US retail sales data was countered by the concern of spreading European sovereign-debt crisis after the cost to insure Spanish and Portuguese debt advanced. The European markets though, after a flat start managed to capitalize on the momentum and supported sentiments in local markets. PSU and Metal counters remained the top gainers in the space with around a percent gains each. The upside in local markets also was capped due to profit booking in rate sensitive counters.

Moreover, the broader markets traded on a flat note around previous closing levels, underperforming their larger peers by a fat margin. The bourses rose on extremely large volumes of over Rs 1.25 lakh crore while the market breadth on BSE was in favor of advances in the ratio of 1271:1251 while 125 scrips remained unchanged.

The BSE Sensex is currently trading at 17,228.27 up by 77.32 points or 0.45% after trading as high as 17,373.28 and as low as 17,103.36. There were 25 stocks advancing against 5 declines on the index.

The broader indices were trading on a flat note; the BSE Mid cap index eased 0.02% and Small cap lost 0.01%.

On the BSE sectoral space, PSU up 0.97%, Metal up 0.80%, Realty up 0.76%, FMCG up 0.59% and Capital Goods up 0.39% were the major gainers, while Consumer Durables down 1.05% was the only laggard in the space.

ONGC up 2.78%, Coal India up 2.76%, Hero Moto up 1.47%, DLF up 1.35% and NTPC up 1.09% were the major gainers on the Sensex, while M&M down 1.06%, Maruti down 0.52%, RIL down 0.46%, Tata Motors down 0.37% and Infosys down 0.31% were the major losers in the index.

Meanwhile, the Reserve Bank of India (RBI) has positively surprised the financial markets as it slashed the repo rate by 50 basis points amid market wide expectations of a 25 basis point cut. This is RBI’s first interest rate reduction in three years and the move is likely to spur growth that has slowed markedly due to relentless monetary tightening.

RBI reduced the repo rate and reverse repo under the liquidity adjustment facility (LAF) by 50 basis points each to 8% and 7% from 8.50% and 7.50% respectively. In order to provide greater liquidity cushion, it has been decided to raise the borrowing limit of scheduled commercial banks under the marginal standing facility (MSF) from 1 per cent to 2 per cent of their net demand and time liabilities (NDTL) outstanding at the end of second preceding fortnight with immediate effect. The cash reserve ratio (CRR) of scheduled banks has been retained at 4.75 percent of their NDTL while the Bank Rate stands adjusted to 9.0 percent with immediate effect.

The RBI, one on world’s most aggressive central banks, had kept rates at their highest level since 2008 in order to rein in the inflationary pressure on the economy. The rate cut has come in the backdrop of lower than expected growth in industrial production and slight moderation in March WPI inflation, however concerns remained that the inflationary pressure would reignite due to volatile international crude oil prices and the depreciating Indian rupee.

The S&P CNX Nifty is currently trading at 5,244.85, higher by 18.65 points or 0.36% after trading as high as 5,293.40 and as low as 5,208.35. There were 36 stocks advancing against 14 declines on the index.

The top gainers on the Nifty were Coal India up 2.80%, ONGC up 2.68%, HCL Tech up 2.33%, R Infra up 2.01% and DLF up 1.51%.

Cairn down 2.26%, Kotak Bank down 1.52%, IDFC down 1.47%, ACC down 0.83% and M&M down 0.82% were the major losers on the index.

In the Asian space, Shanghai Composite shrank 0.87%, Hang Seng plunged 1.02%, Jakarta Composite eased 0.10%, Nikkei 225 shed 0.06%, Straits Times lost 0.77%, Seoul Composite declined 0.37% and Taiwan Weighted plummeted 1.86%.

On the flipside only KLSE Composite was up marginally by 0.01%.

The European markets were trading in red as France’s CAC 40 declined 0.27%, Germany’s DAX slipped 0.10% and Britain’s FTSE 100 fell 0.15%.