Markets witness consolidation ahead of RBI's policy review

Indian equity benchmarks, after trading graciously in first half, snapped the volatile session on a flat note.  The frontline indices ended the session tad above their pre-close level as investors remained cautious ahead of RBI’s policy review on Oct 30. There is a general expectation that the apex bank in order to ease the liquidity conditions will cut cash reserve ratio (CRR) in its monetary policy review and would maintain the key policy rate at the existing levels.

The gauges kick started the session on upbeat note as investors kept themselves busy in piling-up positions in equities following the reshuffle of cabinet ministers on October 28. In the biggest reshuffle of the Congress-led United Progressive Alliance Cabinet, Manmohan Singh inducted 17 new faces and a total of 22 ministers giving several new and young faces a chance to prove their mettle. But, in the second half, markets pared entire gains as market-men opted cautious approach after finance minister’s fiscal consolidation roadmap proved as non event as nothing out of the blue was announced. The FM stated that government has accepted recommendations of the Kelkar Committee on fiscal consolidation and the fiscal deficit would be 5.3% in 2012-13, higher than the budgeted fiscal deficit for the current fiscal at 5.1 percent of GDP. Depreciation in Indian rupee against dollar too dampened the sentiments. The Indian rupee lost 47 paise to 54.03 against the US dollar at the time of closing of equity markets.

Cues from global front too dampened the sentiments as European markets exhibited dead beat in the early session following a string of disappointing corporate earnings last week and a bleak outlook. UBS, a Swiss global financial services company will be in the spotlight on the buzz that Swiss Bank is expected to cut up to 10,000 jobs, or 16 percent of its workforce, in what would be one of the largest layoffs by a bank since the financial crisis. Meanwhile, most of the Asian equity indices shut shop in the red as investors switched their focus away from solid US economic growth in the third quarter to the weak state of global corporate earnings.

Back home, the major amount of blow came in from capital goods pack which tumbled over one and a half percent after the sectoral heavyweight BHEL dipped 6 percent on reporting a lower-than-expected net profit of Rs 1,274 crore as compared to analyst estimates of around Rs 1,418 crore for the second quarter ended September 2012 (Q2). Net sales also grew marginally at Rs 10,400 crore from Rs 10,299 crore for the corresponding period in the previous year. However, market got some strength in late trade and both the bourses recouped their losses supported by Oil and gas sector, which remained the top gainer, garnering over half a percent gain on hopes for improved relationship with the government after the appointment of Veerappa Moily as the new Petroleum and Natural Gas Minister on Oct 28.

The NSE’s 50-share broadly followed index Nifty remained flat managing to end above its psychological 5,650 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by just ten points to finish above the psychological 18,600 mark. The broader markets, however, witnessed some slaughter and ended the session with a cut of over half a percent.

The overall volumes stood at over Rs 1.04 lakh crore, which remained on the lower side as compared to that on Friday. The market breadth remained in favor of declines as there were 1,236 shares on the gaining side against 1,600 shares on the losing side while 129 shares remain unchanged.

Finally, the BSE Sensex gained 10.48 points or 0.06% to settle at 18,635.82, while the S&P CNX Nifty rose by 1.30 points or 0.02% to end at 5,665.60.

The BSE Sensex touched a high and a low of 18,743.41 and 18,572.02, respectively. The BSE Mid-cap index was down by 0.43% and Small-cap index was down by 0.60%.

Wipro up 2.56%, Hero MotoCorp up 1.95%, Tata Power up 1.82%, Dr Reddys Lab up 1.62% and Reliance up 1.53% were the major gainers on the Sensex. On the flip side, BHEL down 6.19%, Sterlite down 2.28%, Tata Motors down 1.80%, Coal India down 1.11% and L&T down 1.08% were the major losers on the index.

The top gainers on the BSE sectoral space were Oil & Gas up 0.62%, Consumer Durables (CD) up 0.51%, Health Care (HC) up 0.27%, TECk up 0.13% and IT up 0.13%. While Capital Goods (CG) down 1.69%, Realty down 0.72%, Power down 0.68%, PSU down 0.56% and Bankex down 0.28% were top losers on the BSE sectoral space.

Meanwhile, with an aim to tackle the stringent coal availability, Power Ministry has urged Coal India to allow power plants run by the same promoter to swap coal among the plants. This will permit the companies having projects at multiple locations to transfer or swap allocated domestic coal linkages among its own plants and hence ensure smooth business activity.

The proposal reached to the Coal Ministry for vetting after the approval from the Power Ministry and Central Electricity Authority (CEA), while it was initially put forth by the Association of Power Producers (APP), a group of private power producers. The ministry also confirmed that the risk associated with the swap agreement would be borne by the power producer including less availability of coal for particular plant after coal mix optimization.

The private power producers anticipate that the proposed process will curtail the generation cost by pared freight charges and optimized plant performance. They also claim that the activity ensures that no review of Power Purchase Agreement (PPA) or its tariff is required and no additional obligation is claimed on Coal India.

The S&P CNX Nifty touched a high and a low of 5,698.30 and 5,645.10 respectively.

The top gainers on the Nifty were Wipro up 2.54%, Tata Power up 2.15%, Hero MotoCorp up 1.73%, Dr Reddy up 1.52% and Cipla up 1.51%.

The top losers on the index were BHEL down 6.58%, Tata Motors down 2.08%, BPCL down 1.48%, L&T down 1.35% and Coal India down 1.34%.

European markets were trading in red. France’s CAC 40 down 0.89%, Germany’s DAX down 0.67% and Britain’s FTSE 100 down by 0.58%.

Asian stock markets ended mostly lower on Monday as better-than-expected US growth data was unable to offset concerns over corporate earnings. Hong Kong market dragged down by sharp declines in local property developers, following the introduction of a 15% tax on housing purchases by foreign and corporate buyers aimed at cooling soaring property prices. Meanwhile, Japans Nikkei closed in negative territory as stronger yen proved a drag in quiet trading ahead of the Bank of Japan meeting. Taiwan went home with red mark reacting on negative earnings guidance of phone maker HTC Crop for the fourth quarter.