Indian benchmarks end flat as RBI holds policy rate

It turned out to be a lackadaisical performance from the Indian benchmark indices on Wednesday as they snapped the session near neutral line. Sentiments remained dismal after Reserve Bank of India (RBI) maintained status quo on interest rates in its sixth monetary policy review of financial year 2016-17. The central bank decided to change the stance from accommodative to neutral and kept the short-term lending rate, called repo rate, unchanged at 6.25%, opting to wait for more clarity on the trend for inflation. RBI has also cut the economic growth forecast to 6.9 percent for the current fiscal from 7.1 percent estimated earlier. However, inventors got some comfort with the central bank’s statement that demonetisation-induced ease in bank funding conditions has led to a sharp improvement in transmission of past policy rate reductions into marginal cost-based lending rates (MCLRs), and in turn, to lending rates for healthy borrowers, which should spur a pick-up in both consumption and investment demand. It also said the economic activity in cash-intensive sectors such as retail trade, hotels and restaurants, and transportation, as well as in the unorganised sector, is expected to be rapidly restored. Some support also came after Economic Affairs Secretary Shaktikanta Das rejecting arguments that fiscal deficit target of 3.2 per cent is optimistic, said it is realistic and there is all possibility that revenues will exceed the target as Budget has not taken into account the demonetisation windfall. Besides, he said, there would be collection taxes next fiscal from those who fail to avail Pradhan Mantri Garib Kalyan Yojana (PMGKY).

On the global front, Asian markets ended mostly lower on Wednesday on lingering political and economic uncertainty in the United States and Europe, which sapped investors’ confidence. The political situation in France with the potential for a ‘Frexit’ as well as uncertainty about President Donald Trump's policies weighed on investors’ sentiments. However, Chinese shares closed higher, led by financial shares, even as weak forex reserves data highlighted the challenges faced by Beijing in curbing capital outflows. While China's foreign exchange reserves unexpectedly fell below the closely watched $3 trillion in January for the first time in almost six years, the fall in reserves was much smaller than in the same period of last year and December. Meanwhile, European markets rose in early trade, led by mining stocks and financials on a heavy day for regional corporate results.

Back home, after getting cautious start, the local benchmarks traded in tight range, near neutral line, for most part of the morning trade as investors remained on the safer side in the absence of any major trigger. The key gauges suffered a setback in afternoon trades as sudden bouts of profit booking emerged in the local markets after RBI kept its policy rate on hold at 6.25% for a second meeting in a row. However, the bourses recovered from the lows of the day and end the session near neutral line. Finally, the NSE’s 50-share broadly followed index Nifty, ended on a flat note with a positive bias, while Bombay Stock Exchange’s Sensitive Index or Sensex lost around forty-five points and ended below the psychological 28,300 mark. However, the broader markets managed to outperform the larger peers as the BSE’s midcap and smallcap indices settled with moderate gains. The market breadth on the BSE was optimistic, as there were 1519 shares on the gaining side against 1348 shares on the losing side, while 163 shares remained unchanged.

Finally, the BSE Sensex declined 45.24 points or 0.16% to 28289.92, while the CNX Nifty was up by 0.75 points or 0.01% to 8,769.05. 

The BSE Sensex touched a high and a low of 28391.64 and 28149.08, respectively and there were 15 stocks on gainers side as against 15 stocks on the losers side on the index.

The broader indices made a positive closing; the BSE Mid cap index gained 0.51%, while Small cap index was up by 0.22%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 2.83%, Realty up by 0.90%, Metal up by 0.87%, Oil & Gas up by 0.70% and Auto up by 0.68%, while FMCG down by 0.39%, Bankex down by 0.37% and IT down by 0.18% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 1.95%, GAIL India up by 1.71%, Mahindra & Mahindra up by 1.57%, Lupin up by 1.31% and Tata Motors up by 1.22%. On the flip side, Dr. Reddy’s Lab down by 1.40%, Sun Pharma down by 1.08%, Hero MotoCorp down by 1.07%, Axis Bank down by 1.04% and Infosys down by 0.88% were the top losers.

Meanwhile, in a move to create digital and less-cash economy, the Lok Sabha has passed the Payment of Wages (Amendment) Bill, 2017, under which specified industrial units will have to pay salaries and wages to workers solely via cheque or by electronic transfer to their bank. According to this bill, there is no need to get the consent of the workers to pay through cheques or through transfer in bank account.

The new Payment of Wages bill will also ensure that the other benefits like ESI, PF are also properly been passed onto the workers. Once the bill becomes law, it will also repeal the Payment of Wages (Amendment) Ordinance 2016, which was promulgated on December 28, 2016 and it replaces the Payment of Wages (Amendment) Bill 2016, which was introduced in Lok Sabha on December 15, 2016.

The amendment enables the Centre as well as state governments to notify industries where employers shall have pay wages either through cheque or crediting that into workers’ bank accounts. At present, the Act covers all those employees in certain categories of establishments whose wage do not exceed Rs 18,000 per month.

Labour Minister Bandaru Dattatreya hailed the initiative aimed at promoting the welfare of workers and said that the new legislation will help check exploitation of workers engaged in un-organised sectors and they will get exact salaries in their bank accounts.

The CNX Nifty traded in a range of 8,791.25 and 8,715.00. There were 32 stocks in green as against 19 stocks in red on the index.

The top gainers on Nifty were BHEL up by 3.09%, Bharti Infratel up by 2.89%, Grasim Industries up by 2.83%, ACC up by 2.76% and Idea up by 2.42%. On the flip side, Dr. Reddy’s Lab down by 1.67%, Sun Pharma down by 1.16%, Hero MotoCorp down by 1.10%, Tata Steel down by 1.02% and ITC down by 1.01% were the top losers.

The European markets were trading mixed; Germany’s DAX increased 14.38 points or 0.12% to 11,563.82, France’s CAC increased 22.91 points or 0.48% to 4,777.38, while UK’s FTSE 100 decreased 7.9 points or 0.11% to 7,178.32.

Asian equity markets ended mixed on Wednesday, as solid earnings results, a pause in the yen rally and signs that the Chinese government was extending steps to defuse potential credit bubbles helped offset investor concerns over political risks in Europe and the United States. Chinese shares closed higher, led by financial shares, even as weak forex reserves data highlighted the challenges faced by Beijing in curbing capital outflows. While China's foreign exchange reserves unexpectedly fell below the closely watched $3 trillion in January for the first time in almost six years, the fall in reserves was much smaller than in the same period of last year and December. Japanese shares ended higher, a day after it hit a two-week low. While the dollar remained choppy against the yen, though expectations surrounding Prime Minister Shinzo Abe's visit to the United States from Thursday offered some support.