Post session - Quick review

It turned out to surprisingly pleasant session of trade for Indian equity markets, which after getting a gap up-opening, went on accumulating significant gains despite the Reserve Bank of India’s (RBI) no-action stance in its Mid-Quarter Monetary Policy Review 2012-2013. The apex bank, repeatedly defying calls from the finance ministry to cut rates to prop up an economy that has posted GDP growth below 6 percent for the past three quarters, kept the bank lending rate unchanged at nine percent, the repurchase (repo) rate at eight percent, reverse repo rate at seven percent, the cash reserve ratio at 4.25% and statutory liquidity ratio at 23%. However, gains crept in at D-street tracing recuperation of banking stocks, which witnessed buying on signs of a cut in the repo rate in the January-March quarter. In a clear signal that the focus of the monetary policy will now shift to growth, in the report the apex bank stated, ‘recent inflation patterns and projections provide a basis for reinforcing our October guidance about policy easing in the fourth quarter.’ Out of 13 sectoral pivotals, only Oil & Gas counters, turned out be a spoil sport, rest all 12 sectoral indices witnessed significant traction to end up in green terrain. Surge of Realty, Metal and Capital Goods counters, emerging as the top gainers, rendered maximum support. In the optimistic session of trade 30 share index of Bombay Stock Exchange (BSE), Sensex, puffing up over century point gains, finished above 19300 psychological level. Similarly, widely followed index of National Stock Exchange (NSE), Nifty, too adding over half a percent gains, concluded above 5850 bastion, but sub 5900 level. Additionally, even broader indices, ended above half a percent points. Meanwhile, trade of over Rs 2.50 lac crore was done in terms of volume turnover (Provisional).

Further even, positive global-set up encouraged investor’s to pool their money into risky asset class such as equities. Asian shares and other risk assets rose on Tuesday as signs of compromise sparked new optimism that the U.S. 'fiscal cliff' budget tussle could be settled before tax hikes and spending cuts begin to bite early next year. Additionally, even European shares rose towards 2012 highs on Tuesday, tracking overnight gains on Wall Street on signs of progress over a compromise to halt austerity measures that could damage the world's top economy's prospects.

Closer home, besides other rate sensitive’s, Metal stocks rose that too for the third straight day after data on 14 December 2012 showed that a preliminary version of HSBC's China manufacturing Purchasing Managers' Index hit a 14-month high in December 2012. Additionally, slide of Reliance Industries (RIL) dragged the Oil & Gas counter lower. RIL has agreed to audit by CAG for block KG-DWN-98/3 (KG-D6) for the years 2008-09 to 2011-12 without prejudice to the rights and contentions of the contractor under the contractual provisions. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1670:1270 while 133 scrips remained unchanged. (Provisional)

The BSE Sensex gained 115.35 points or 0.60% and settled at 19359.77. The index touched a high and a low of 19396.28 and 19149.03 respectively. 22 stocks were seen advancing while 7 stocks were declining and 1 remain unchanged on the index (Provisional)

The BSE Mid-cap index was up by 0.54% while Small-cap index was up by 0.65%. (Provisional)

On the BSE Sectoral front, Realty was up by 2.40%, Metal up by 1.82%, Capital Goods up by 1.66%, TECk up by 1.17% and Power up 0.99% were the top gainers, while Oil & Gas down by 0.26 was the sole losers in the space.

The top gainers on the Sensex were Bharti Airtel up by 4.51%, BHEL up 4.30%, Tata Steel up 4.00%, Hindalco Industries up by 2.58% and Sun Pharma up 2.29%, while, Maruti Suzuki down by 1.50%, ONGC down by 0.74%, Dr Reddys Lab down by 0.68%, RIL down by 0.46% and ITC down by 0.45% were the top losers in the index. (Provisional)

Meanwhile, shrugging off moderation in inflation figures in past two months, Reserve Bank of India (RBI) kept interest rates on hold in its ‘Mid-Quarter Monetary Policy Review: December 2012’ despite government’s pressure for a cut, sticking to its guidance of not easing monetary policy before early next year.

Acting prisoner to its own guidance, RBI, left key policy rates, viz. repo and reverse repo, untouched at 8 per cent and 7 per cent respectively. However, what came as a major disappointment was a status quo stance even on Cash Reserve Ratio (CRR), tool off lately being used to manage a cash deficit and prod banks to loosen lending rates. CRR or the portion of deposits banks keep with RBI remain unchanged at 4.25%. Meanwhile, the marginal standing facility (MSF) and the Bank Rate were untouched at 9.0 per cent.

However, the RBI in its guidance has reinforced the likelihood of steady moderation in inflation going into 2013-14, but at the same time is also expecting inflation to edge higher over the next two months.

Inflation declined to 10-month low of 7.24 percent in November from 7.45 percent in the previous month, raising hopes that RBI may cut rates to spur growth. The economic growth in the first half of the fiscal fell to 5.4 percent, as against 7.3 percent in the year-ago period. The growth in 2011-12 had fallen to a nine-year low of 6.5 percent.

Offering a little solace, RBI, in a clear signal that the focus of the monetary policy will now shift to growth, in the report stated, ‘recent inflation patterns and projections provide a basis for reinforcing our October guidance about policy easing in the fourth quarter.’

The wholesale price index, India's main gauge for inflation, has remained above 7 percent for the past three years, a key reason why the RBI has refrained from lowering policy rates since April's 50-basis point cut. In doing so, the central bank has repeatedly defied calls from the finance ministry to cut rates to prop up an economy that has posted GDP growth below 6 percent for the past three quarters and is on track for its weakest annual performance in a decade in the fiscal year ending March.

India VIX, a gauge for markets short term expectation of volatility lost 3.21% at 14.44 from its previous close of 14.92 on Monday. (Provisional)

The S&P CNX Nifty gained 38.90 points or 0.66% to settle at 5,896.80. The index touched high and low of 5,905.80 and 5,823.15 respectively. 37 stocks advanced against 12 declining and 1 remain unchanged on the index. (Provisional)

The top gainers on the Nifty were BHEL up by 4.39%, Bharti Airtel up by 4.36%, Tata Steel up by 4.12%, Hindalco up by 2.62% and JP Associates up by 2.55%. On the other hand, Maruti Suzuki down 1.57%, Ranbaxy down by 0.81%, Dr Reddy’s Lab down by 0.62%, Bajaj-Auto down by 0.60% and Reliance Industries down by 0.59% were the top losers. (Provisional)

The European markets were trading in green with, France’s CAC 40 up 0.10%, Germany’s DAX up 0.55% and the United Kingdom’s FTSE 100 up 0.40%.

Asian stock markets ended mostly higher on Tuesday, as signs of progress in U.S. budget negotiations improved the sentiments. However, Hong Kong market went home with red mark on second consecutive day, weighted down by a 3.3% loss for AIA Group after American International Group sold its remaining stake in the Asian insurance giant. Investors were trading cautiously ahead of Japan's trade data on Wednesday and the Bank of Japan's policy meeting on Thursday. Japan's Nikkei Stock Average went home with green mark, after touching highest level in more than eight months.