Post session - Quick review

Local bourses, furthering their uptrend for ninth consecutive session, depicted yet again that the new found strength of Indian equity markets was here to stay. Capitalizing on the previous week’s momentum, when government announced a series of big-bang reforms, beginning with an increase in diesel prices followed by allowing foreign direct investment (FDI) in multi-brand retail and power exchanges as well as relaxing the norms on FDI in aviation and broadcasting, bourses managed to gain traction for yet another session. However, the much awaited RBI’s mid-quarterly policy review, turned out to be somewhat party pooper for Dalal Street, which in a knee jerk reaction, dipped to intra-day’s low level, as investor’s digested the world’s most aggressive centeral bank’s anti-inflationary stance. After acknowledging the small effort made by the finance minister in moving towards fiscal consolidation, RBI’s governor, Duvvuri Subbarao, playing safe, just slashed CRR by 25 basis points, a move which is expected to release Rs 17,000 crore in banking system, besides underscoring that its priority remained fighting inflation.

Nevertheless, second half of the trading session recuperated much of the bourses lost ground as several bankers hinted at reducing lending rates in the coming days, which was largely seen positive for the equity markets. Thus by the end of the trade, 30 share barometer index of Bombay Stock Exchange (BSE), gained over half a century of points, to shut shop above the 18500 crucial mark, while 50 share barometer index of National Stock Exchange (NSE), Nifty, too adding over half a percent, managed to shut shop above the 5600 psychological level. The broader indices, on the other side, luring significant traction in comparison to the frontline indices went home with gains of over a percentage points.

However, Indian equity markets on the much awaited session, outperformed the globe. Asian pacific shares, relaxing after Friday's heavy gains, ended mixed on Monday, with South Korean touching a more than six-month high against the dollar. However, China's shares fell over 2% on worries about fresh tightening measures and a worsening territorial spat between China and Japan, while elsewhere in Asia trade was more muted after the Federal Reserve's plan last week to boost the U.S. economy. Meanwhile, European stocks began the new week in cautious fashion, as investors took a breather following a two-week rally as key index hit strong resistance.

Closer home, stocks of Realty, Capital Goods and Bankex counters emerged as the shining stars among the 13 sectoral space, while stocks from defensive Fast Moving Consumer Goods, Information Technology and Technology counters, failed to muster any gains and emerged as top laggards, Additionally, stocks of aviation, retail and cable companies were on buyers' radar after the government decided to open these sectors for overseas investors. Late on Friday evening, the government allowed 51% foreign investment in multi-brand retail, 49% investment by foreign airlines in aviation and raised the FDI cap in broadcasting from 49%-74%. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1628:1251 while 124 scrips remained unchanged. (Provisional)

The BSE Sensex gained 72.62 points or 0.39% and settled at 18,536.89. The index touched a high and a low of 18,715.03 and 18,480.54 respectively. 18 stocks were seen advancing while 12 stocks were declining on the index (Provisional)

The BSE Mid-cap index was up 1.23% while Small-cap index was up 1.14%. (Provisional)

On the BSE Sectoral front, Realty was up 6.40%, Capital Goods was up 3.68%, Bankex was up 3.15%, Power up 2.20%, and Oil & Gas up by 2.03% were the top gainers, while FMCG down 3.49%, IT down by 3.33%, TECk down by 1.96% and Health Care down by 1.87% were the only losers in the space.

The top gainers on the Sensex were Jindal Steel up 5.90%, SBI up 5.71%, ICICI Bank up by 5.17%, Sterlite Industries up 4.41% and BHEL up 4.35% while, ITC down by 5.45%, TCS down by 5.24%, Dr. Reddy’s Lab down by 4.35%, Infosys down by 2.82% and HUL down by 2.49% were the top losers in the index. (Provisional)

Meanwhile, in an effort to sustain the newly-found animal spirit, Reserve Bank of India (RBI), in its mid-quarter monetary policy review, walking through a much thin rope, only slashed cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.75 per cent to 4.50 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning September 22, 2012. However, world’s most aggressive central bank, furthering its anti-inflationary stance, maintained a status quo on key policy rates, viz. repo and reverse repo, currently at 8 per cent and 7 per cent respectively. Meanwhile, marginal standing facility (MSF) rate and the Bank Rate stood unchanged at 9.0 per cent.

In an effort to capitalize on the momentum generated by last week's sudden burst of reforms by the government, which is basking in all-round praise for decisively attempting to rebound after months of paralysis, RBI’s move, which is expected to pump in around Rs 17,000 crore into the banking system, is seen as a positive one by some bankers. 

Meanwhile, after facing months of contemptuous criticism on policy paralysis, the government braved the might of opposition, by announcing a series of big-bang reforms, beginning with an increase in diesel prices followed by allowing foreign direct investment (FDI) in multi-brand retail and power exchanges as well as relaxing the norms on FDI in aviation and broadcasting.

However, RBI in its mid-quarter monetary policy review underscored that since inflationary tendencies have persisted, the primary focus of monetary policy remains the containment of inflation and anchoring of inflationary expectations.  Further, in its guidance, RBI pointing at current situation, where persistent inflationary pressures alongside risks emerging from twin deficits - current account deficit and fiscal deficit - has constrained a stronger response of monetary policy to growth risks, stated that the stance of RBI’s monetary policy will be conditioned by careful and continuous monitoring of the evolving growth-inflation dynamic.

Only in April, the Reserve Bank implemented a frontloaded policy rate reduction of 50 basis points on the expectations of fiscal policy support for inflation management alongside supply-side initiatives for addressing the deceleration of investment and growth. As these expectations did not materialise and inflation remained firmly above 7.5 per cent, the Reserve Bank decided to pause in its policy easing in the mid-quarter review (MQR) of June and in the first quarter review (FQR) of July.

India VIX, a gauge for markets short term expectation of volatility gained 15.60% at 17.78 from its previous close of 15.38 on Friday. (Provisional)

The S&P CNX Nifty gained 29.25 points or 0.52% to settle at 5,606.90. The index touched high and low of 5,652.20 and 5,585.15 respectively. 29 stocks advanced against 21 declining ones on the index. (Provisional)

The top gainers on the Nifty were Reliance Infrastructure was up 8.34%, IDFC up 6.87%, DLF up 6.76%, Bank of Baroda up 6.65% and JP Associates was up 6.04%. On the other hand, ITC down 5.57%, TCS down by 5.37%, Dr. Reddy’s Lab down by 4.03%, BPCL down 3.30% and Ranbaxy Lab down 2.95% were the top losers. (Provisional)

The European markets were trading in red with, France’s CAC 40 down 0.59%, Germany’s DAX down 0.22% and the United Kingdom’s FTSE 100 down 0.26%.

Asian markets ended mixed following strong rally after Federal Reserve’s stimulus measures to boost US economy. Shanghai ended lower as Citigroup Inc. trimmed its 2013 growth outlook for China, while Hong Kong shares closed flat as developers' shares were mixed after the Chinese territory's de facto central bank has ordered banks to curb home loans to borrowers with more than one mortgage to prevent the city being flooded with hot money after the United States announced an aggressive new stimulus plan to spur growth. Situation between China and Japan over a group of disputed islands also battered companies with Japan links

The Japanese market was closed today on account of a public holiday on ‘Respect for the Aged Day’, while the Malaysian market remained closed on account of Malaysia Day public holiday.