Benchmarks recoup some lost ground; Nifty reclaims 5600 psychological level

After falling in a knee-jerk reaction to the outcome of Second Quarter Review of Monetary Policy 2012-13, where world’s most aggressive bank, extending its battle against Inflation left key policy rates unchanged, local equity markets have now recouped some of their lost ground. Support which emerged to benchmark equity indices at lower levels, mainly aided its recovery. However, trim in bourses losses also were courtesy gains in Asian pacific shares. Major stress was witnessed among banking stocks, mainly the PSUs post no lollypop of rate cuts were granted, however, even other rate sensitive’s, viz, Auto and Realty witnessed nasty laceration. The only pivotal of strength were Information Technology and Technology stocks, which showcasing resilience, depicted gains amidst sluggish trade.

Thus, emerging from intra-day’s low, barometer 30 share index --  Sensex -- was trading sub 18500 mark, while widely followed 50 share benchmark index --  Nifty --  despite trading lower over 50 points, reclaimed its mental 5600 mark. The broader indices, meanwhile, failed to show any signs of recovery, with both Midcap and Smallcap indices trading with cut of over a percentage.

Asian pacific shares rose modestly higher on Tuesday with the Tokyo market gaining ahead of the outcome of the Bank of Japan's policy meeting, while super storm Sandy contributed to a quiet day of trading. However, momentum was curbed by a giant, powerful storm that will keep U.S. markets shut. Meanwhile, European stock index futures are expected to start the trade higher on Tuesday, keeping within their recent range in a likely quiet session with Wall Street closed, as investors digest mixed corporate results.

 The BSE Sensex is currently trading at 18467.74, down by 168.08 points or 0.90% after trading in a range of 18718.28 and 18426.46. There were 5 stocks advancing against 25 declines on the index.

The broader indices continue to witness profit-booking; the BSE Mid cap and Small cap indices were trading lower by 1.01% and 1.03% respectively.

The top gainers on the BSE sectoral space were, IT up by 0.47% and TECk up by 0.20%, while, Bankex down by 2.19%, Realty down by 2.17%, CD down by 1.95%, CG down by 1.87%, Auto down by 1.81% were the top losers on sectoral space.

The top gainers on the Sensex were Dr Reddy’s Lab up by 1.11%, Hindustan Unilever up by 0.90%, Infosys up by 0.89% and TCS up by 0.61%. On the other hand, Tata Motors down by 3.93%, Hero MotoCorp down by 3.76% SBI down by 3.25%, L&T down by 2.69% and ICICI Bank down by 2.49% 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 5605.75, down by 59.85 points or 1.06% after trading in a range of 5,689.90 and 5,593.15. There were 7 stocks advancing against 42 declines on the index, while 1 stock remained unchanged.

The top gainers of the Nifty were Dr Reddy up by 1.12%, HUL up by 0.93%, Infosys up by 0.84%, TCS up by 0.50% and Lupin up by 0.30%. While, Bank of Baroda down by 5.02%, JP Associates down by 3.96%, Tata Motors down by 3.93%, Hero MotoCorp down by 3.65% and SBI down by 3.46% were the top losers on the index

Asian equity indices were trading mostly in the green; Taiwan Weighted surged 1.28%, Kospi Composite added 0.43%, Shanghai Composite rose 0.19%, Jakarta Composite advanced  0.16%, Straits Times rose 0.17% and KLSE Composite gained 0.09% while Hang Seng down by 0.74% and Nikkei 225 lower by 0.98% were the only losers amongst Asian pack.