Benchmarks escalate to intra-day high level; broader indices too stage positive trend

After falling in a knee jerk reaction to RBI’s no-action stance, benchmark equity indices recovering substantial ground are trading near their intra-day’s high level. Hopes that RBI would shift its focus towards boosting growth, mainly led to some recuperation at D-Street, with gains in Metal, Capital Goods and Consumer Durables counters too adding to the optimistic environment. Further, even positive global development on signs of compromise sparking 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, buttressed the sentiment. In an important session of trade, Sensex, is trading above 19250 level with gains of over quarter points. Similarly, widely followed index, Nifty, is hovering above 5850 bastion, with spurt of close to half a percent. Broader indices too turned positive. On the flip side, Banking, Oil & Gas and Fast Moving Consumer Goods counters, languishing at the bottom, provided ceiling to the gains of the bourses. Banking shares witnessed brutal pounding after the Reserve Bank of India (RBI) kept repo rate and cash reserve ratio (CRR) unchanged in its mid-quarter monetary policy review today. The overall market breadth on BSE is in the favour of advances which thumped declines in the ratio of 1346:1258, while 126 shares remained unchanged.

The BSE Sensex is currently trading at 19274.56, up by 30.14 points or 0.16% after trading in a range of 19330.60 and 19149.03. There were 18 stocks advancing against 12 declines on the index.

The broader indices turned positive; the BSE Mid cap and Small cap indices were trading higher by 0.13% and 0.20% respectively.

The top gaining sectoral indices on the BSE were, Metal up by 1.66%, Capital Goods (CG) up by 1.15%, Consumer Durables (CD) up by 1.09%, Power up by 0.86% and Health Care up by 0.76%. While Bankex down by 0.53%, Oil & Gas down by 0.42%, FMCG down by 0.39%, IT down by 0.21% were the top losers on the index.

The top gainers on the Sensex were Bharti Airtel up by 3.68%, BHEL up by 3.03%, Tata Steel up by 2.52%, Hindalco Industries up by 2.30% and Sun Pharma up by 2.27%.

On the flip side, Maruti Suzuki down by 0.98%, ONGC down by 0.48%, HUL down by 0.32%, RIL down by 0.30% and SBI down by 0.22% were the top losers on the Sensex.

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.

The S&P CNX Nifty is currently trading at 5,884.05, up by 26.15 points or 0.45% after trading in a range of 5,889.60 and 5,823.15. There were 36 stocks advancing against 14 declines on the index.

The top gainers of the Nifty were Bharti Airtel up by 3.78%, BHEL up by 3.17%, Tata Steel up by 2.49%, Sesa Goa up by 2.41% and Sun Pharma up by 2.35%.

On the flip side, Axis Bank down by 1.06%, Maruti Suzuki down by 1.00%, ACC down by 0.80%, Kotak Bank down by 0.53% and Ranbaxy down by 0.49% were the major losers on the index.

Most of the Asian equity indices were trading in green; KLSE Composite added 0.44%, Nikkei 225 soared 0.96%, Straits Times gained 0.22%, KOSPI Composite was up by 0.51% and Taiwan Weighted was up by 0.16%.

On the flip side, Shanghai Composite declined 0.29%, Hang Seng down 0.12% and Jakarta Composite declined 0.61%.