Sensex, Nifty moves in red zone; bank, realty major losers as RBI holds key rates

Following a firm opening, Indian equity markets moved into negative territory as RBI kept repo rate unchanged and cut GDP forecast significantly. Meanwhile, central bank has slashed cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.50% to 4.25%, which would inject Rs 17,500 crore of primary liquidity into the banking system. The central bank has cut fiscal 2013 GDP growth forecast to 5.8% and raised inflation projection for FY 2013 to 7.5%. The BSE benchmark was down 205 points, while NSE benchmark fell 64.65 points to 5,601 levels. In currency markets, Indian rupee erased all early gains in the late morning session on increasing dollar demand from importers. On sectoral front, all rate sensitive stocks like bank and automobile stocks drifted down sharply. Realty stocks, which seemed to find some support, were easing down as well with capital goods and consumer durables stocks. Select information technology and TECk stocks were finding modest support. In global markets, Asian shares swung between gains and losses amid speculation that the Bank of Japan will add stimulus. Back home, the market breadth favoring negative trend; there were 789 shares on the gaining side against 1545 shares on the losing side while 100 shares remain unchanged.

The BSE Sensex is currently trading at 18,430.62 down by 205.20 points or 1.10% after trading in a range of 18,718.28 and 18,429.80. There were 5 stocks advancing against 25 declines on the index.

The broader indices also pared all the early gains; the BSE Mid cap index was down by 1.03% and Small cap index was down by 0.90%.

The top gainers on the BSE sectoral space were, IT up by 0.20% and TECk up by 0.03%, while, Realty down by 2.46%, Bankex down by 2.15%, CG down by 2.04%, Auto down by 1.79% and CD down by 1.60% were the top losers on sectoral space.

The top gainers on the Sensex were Dr Reddys Lab up by 0.91%, Hindustan Unilever up by 0.62%, Infosys up by 0.50%, TCS up by 0.49% and Bharti Airtel up by 0.13%. On the other hand, Tata Motors down by 3.97%, ICICI Bank down by 2.88%, SBI down by 2.79%, Hero MotoCorp down by 2.67% and Hindalco down by 2.51% were the top losers on the Sensex.   

Meanwhile, extending its battle against inflation, the Reserve Bank of India (RBI) in Second Quarter Review of Monetary Policy 2012-13, left key policy rates, viz. repo and reverse repo, unchanged at 8 per cent and 7 per cent respectively. Meanwhile, the marginal standing facility (MSF) rate and the Bank Rate too stand unchanged at 9.0 per cent. However, the apex bank, in a much anticipated move, slashed cash reserve ratio (CRR), the proportion of deposits banks have to park with RBI, by 25 basis points from 4.50 per cent to 4.25 per cent, a move which would inject Rs 17,500 crore of primary liquidity into the banking system to pre-empt potentially tightening of liquidity.

RBI has kept the policy repo rate at 8.00 percent since April despite growing clamor for rate cuts from members of the government and industry for the revival of the country's flagging economic growth. In its last policy review in September, RBI held interest unchanged, though it had lowered CRR by 0.25 per cent to infuse Rs 17,000 crore liquidity into the system.

Failing to do Quid pro quo with Finance Ministry, RBI submissively preferred to fight against the inflation monster, which has remained its topmost priority. On Oct 29, Finance Minister P Chidambaram unveiled a five-year road map for fiscal consolidation to promote investments, contain inflation and reduce fiscal deficit to about three percent to take India onto the high growth trajectory.

As per the apex bank, since April 2012, the monetary policy stance has sought to balance the growth-inflation dynamic through calibrated easing. Moving on to inflation, headline WPI inflation remained sticky, at above 7.5 per cent on a y-o-y basis, through the first half of the current year. Furthermore, in September there was a pick-up in the momentum of headline inflation owing to the increase in fuel prices and elevated price levels of non-food manufactured products.

However, as per the country’s central bank, the baseline projection for headline WPI inflation for March 2013 is raised to 7.5 per cent from 7.0 per cent indicated in July. Importantly, inflation is expected to rise somewhat in the third quarter before beginning to ease in the fourth quarter. Thus in view of this, the RBI, in its guidance, has estimated a reasonable likelihood of further policy easing in the fourth quarter of this fiscal year.

The S&P CNX Nifty is currently trading at 5,598.00, down by 67.60 points or 1.19% after trading in a range of 5,689.90 and 5,595.95. There were 6 stocks advancing against 44 declines on the index.

The top gainers of the Nifty were Dr Reddy up by 0.87%, Infosys up by 0.48%, HUL up by 0.38%, Lupin up by 0.21% and TCS was up by 0.08%. While, Tata Motors down by 3.88%, Bank of Baroda down by 3.81%, PNB down by 3.16%, SBI down by 3.00% and DLF down by 2.92% were the top losers on the index.

Asian equity indices were trading mostly in the green; Taiwan Weighted up by 1.28%, Kospi Composite was up by 0.43%, Shanghai Composite was up by 0.01%, Jakarta Composite up by 0.11%, Straits Times was up by 0.19% and KLSE Composite up by 0.13% while Hang Seng was down by 0.74% and Nikkei 225 was down by 0.98% were the only losers.