Benchmarks trade cautiously in early deals

Indian equity benchmarks are trading slightly in red in early deals on Thursday, as sentiments remained dampened with Arvind Subramanian expressing his unhappiness over the Reserve Bank's inflexibility on interest rates. He warned that real policy rates are becoming tighter and rising at a time of low inflation and slowing growth. However, Reserve Bank of India (RBI) in its policy review gave the impression that the central bank had embraced an accommodative stance once again, keeping the possibility of a future rate cut open. 

On the global front, Asian markets trading mostly in green as traders opted to buy beaten down but fundamentally strong stocks. However, traders seemed reluctant to add any big positions before Chinese trade data. The US markets ended modestly higher in the last session on the heels of the pullback seen over the two previous sessions.

Back home, PSU banking stocks remained under pressure, as the RBI has raised its concern on state governments waiving off farm loans and has said that such actions increase the risk of slippages and contribute to inflation sooner or later. However, the public sector oil marketing companies, BPCL and HPCL edged higher, as the international crude prices slumped by close to 5 percent. Meanwhile, the market breadth indicating the overall health of the market was strong, with 1042 shares gaining and 844 shares declining, while a total of 99 shares were unchanged.

The BSE Sensex is currently trading at 31259.29, down by 11.99 points or 0.04% after trading in a range of 31214.35 and 31354.51. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.28%, while Small cap index was up by 0.10%.

The top gaining sectoral indices on the BSE were Metal up by 1.71%, Basic Materials up by 0.72%, Healthcare up by 0.66%, Industrials up by 0.26% and Capital Goods up by 0.24%, while IT down by 1.23%, TECK down by 1.10%, Realty down by 0.95%, Telecom down by 0.92% and Utilities down by 0.67% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 3.79%, Dr. Reddy’s Lab up by 1.94%, HDFC up by 1.90%, Sun Pharma up by 1.32% and Tata Motors up by 0.67%. On the flip side, TCS down by 2.39%, GAIL India down by 1.74%, Adani Ports down by 1.42%, ONGC down by 1.19% and Bharti Airtel down by 1.09% were the top losers.

Meanwhile, in a much anticipated move, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), kept key interest rates unchanged for the fourth time in a row, but softened its hawkish stance owing to the fall in retail inflation to a record low and lower-than-expected economic growth. It also raised concerns over fiscal slippages in view of rush for farm loan waivers.

The fifth meeting of MPC maintained the repo rate, at which it lends to the banks, at 6.25 percent and the reverse repo, at which it borrows, at 6 percent. It also maintained status quo for the second bi-monthly monetary policy for 2017-18. CRR or Cash Reserve Ratio - which is a portion of deposits that banks must mandatorily keep with the RBI, also remained unchanged at 4 percent. It however slashed the Statutory Liquidity Ratio (SLR) or the percentage of deposits that banks have to park in government securities, by 0.5 per cent to 20 percent, a move that will help infuse more liquidity into the banking system.

The central bank also projected that inflation will remain in the 2 to 3.5 percent range for the first half of 2017-18 and in the 3.5 to 4.5 percent for second half. The RBI in its monetary policy review also cut growth projection for current fiscal to 7.3 per cent from 7.4 per cent. The growth of real gross value added (GVA) for 2016-17 has been pegged at 6.6 percent, 0.1 percentage point lower than the second advance estimates released in February 2017.

Although, the central bank said that it does not expect the implementation of Goods and Services Tax (GST) to have a material impact on overall inflation. GST is touted as the largest tax reform since India's independence in 1947 and aims to bring India under a unified tax regime moving away from the current system where various central and state taxes are levied on goods and services.

Separately, the RBI reduced the standard asset provisioning requirement for home loans from 0.4% to 0.25% - a move which will prompt banks to push such loans by reducing interest rates and risk weight on such loans has also been rationalised.

The CNX Nifty is currently trading at 9658.65, down by 5.25 points or 0.05% after trading in a range of 9643.05 and 9688.70. There were 22 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Tata Steel up by 4.02%, Dr. Reddy’s Lab up by 2.09%, HDFC up by 1.60%, Hindalco up by 1.52% and Sun Pharma up by 1.14%. On the flip side, TCS down by 2.53%, Bharti Infratel down by 1.68%, GAIL India down by 1.47%, Adani Ports down by 1.35% and Yes Bank down by 1.34% were the top losers.

Asian markets were trading mostly in green; Jakarta Composite rose 1.36 points or 0.02% to 5,718.68, FTSE Bursa Malaysia KLCI gained 1.89 points or 0.11% to 1,787.81, Nikkei 225 advanced 3.14 points or 0.02% to 19,987.76, Shanghai Composite increased 4.49 points or 0.14% to 3,144.81, Taiwan Weighted added 11.74 points or 0.11% to 10,221.73 and Hang Seng was up by 53.28 points or 0.21% to 26,027.44.

On the flip side, KOSPI Index was down by 8.01 points or 0.34% to 2,352.13.