Markets likely to get a cautious start; RBI policy review eyed

The domestic markets continued their rally mood and added another close to two percent in last session, taking their gains to over three percent in last two sessions and benchmarks regaining their crucial levels. Today, is the big day for the Indian markets, as the much awaited first quarterly monetary policy will be announced by the Reserve Bank of India (RBI), though the general expectation is the RBI will keep the rates unchanged but there are optimist who think that the apex bank may go for another round of easing and can cut policy rates, if the RBI delivers on their expectation the markets are likely to strengthen further. However, the start is likely to be cautious and movement can be seen either side after the policy announcement. In a  report of Macroeconomic and Monetary Developments, released on the eve of the first quarter review of monetary policy RBI’s has said that the potential growth rate has moderated to 7.5% from 8% earlier due to a host of global and domestic factors and in 2012-13 it is likely to remain below potential. The IT sector may remain buzzing as the Prime Minister Manmohan Singh has set up a panel headed by N. Rangachary to review taxes in information technology and R&D sectors. The monsoon and drought-like situation unfolding in several states too is likely to keep the investors cautious, meanwhile the EGoM headed by Agriculture Minister Sharad Pawar is expected to meet today over relief measures to tackle the situation.

There will be lots of important result announcements too. Bhushan Steel, Cipla, Delta Corp, EID Parry, Elecon Engr, GTL, Hindustan Oil, IDBI Bank, IPCA Lab, Jaiprakash Associates, Karur Vysya Bank, KEC Intl, NDTV etc are among the many to announce their numbers today.

US markets closed marginally lower on Monday, cooling off after two days of rally, as the mood of investors turned cautious to see if central bankers later this week will suggest more stimulus. Majority of the Asian markets have made a green start banking on hopes that the Federal Reserve and the European Central Bank may signal some stimulus to ramp up growth.

Back home, Prolonging their enthusiasm for second straight day, domestic benchmarks vehemently rallied by about two percent to re-conquer the psychological 5,200 (Nifty) and 17,150 (Sensex) bastions during the session but, snapped the session a tad below that levels. The frontline indices gathered strength from strong global cues and commenced the northbound journey throughout the session with great conviction ahead of the Reserve Bank of India’s policy meet on July 31. Hyperactive bulls aggressively piled up positions not only in heavyweight stocks but in the broader markets too. Banking space witnessed a jubilant run today on the back of better than expected Q1 numbers registered by some banking majors. Banks like Corporation Bank, Syndicate Bank, Indian Overseas Bank, Allahabad Bank, Oriental Bank of Commerce and Bank of Baroda all have reported high-quality Q1 numbers. Investors also piled up positions in the rate sensitives like auto and realty stocks on hopes that Reserve Bank of India’s (RBI) governor Duvvuri Subbarao will spring a pleasant surprise in the form of a rate cut. Meanwhile, data showing resumption of buying of Indian stocks by foreign institutional investors (FIIs) also underpinned sentiment. FIIs bought shares worth a net Rs 563.72 crore on July 27, 2012. On sectoral front, power sector remained the top gainer on the BSE sectoral space, garnering over three and a half percent on the back of partial power restoration from northern grid. Moreover, Power minister Sushil Kumar Shinde said that ‘60% of power has been restored in the northern region and the remaining will be restored in few hours.’ Moreover, metal space also rallied over two percent and stocks like, JSW Steel, Jindal Steel & Power, Hindalco Industries, Nalco and Hindustan Zinc edged higher after LMEX, a gauge of six metals traded on the London Metal Exchange, rose 1.22% on July 27, 2012. Besides, aviation stocks flied higher led by, Spicejet, which zoomed over 22% after witnessing turnaround in Q1 result. Stocks of Jet Air India and Kingfisher Airlines also took off 7.72% and 2.01% respectively. Finally, the BSE Sensex surged 304.49 points or 1.81% to settle at 17,143.68, while the S&P CNX Nifty soared by 99.95 points or 1.96% to close at 5,199.80.