Post session - Quick review

What seemed as pleasant session of trade turned out to be disappointing one, as market participants worrying about the future monetary policy stance of Reserve Bank of India (RBI), booked out profits. Much of the drubbing came to the session in the last leg of the trade, whereby benchmark equity indices unwinding all the early part of gains, dipped their head into red terrain and ended with a cut of over half a percent.

Barometer gauges recovering early losses, instantly bounced into green territory after the policy announcement, whereby India’s Apex bank, caving into growing clamour for rate cuts, not only slashed repo rate by 25 bps, but also reduced Cash Reserve Ratio (CRR) by a 25 bps. However bourses gains were stained after RBI Governor hinted less room for cuts in future. Leading the markets from behind, stocks from Realty, Oil & Gas and Auto counters toppled the BSE sectoral list. Much to the investor’s disgust, not even banking stocks were spared.

Fizzling out the entire euphoria of the trade, 30 share barometer index, Sensex, on Bombay Stock Exchange(BSE), tumbled over century of points, to settle a tad above the crucial 20 k level; while 50 share widely followed index, Nifty, too taking a nasty knock of close to half a percent, settled sub 6050 bastion. Meanwhile, broader indices too ended with colossal losses of over 0.50%.

On the global front, Asian markets ended mostly higher on Tuesday, with Australia leading gains after reopening following a public holiday. Regional markets were seen positioning themselves ahead of a string of major economic events later this week. In the U.S., the Federal Reserve will conclude its latest policy meeting on Wednesday, while non-farm payrolls numbers will be released on Friday. Meanwhile, European stock markets nudged higher in choppy trade on Tuesday, with resource firms on the rise, as encouraging German consumer-confidence data helped lift sentiment. On Tuesday, data from Germany showed consumers became more confident at the start of 2013. The Gfk consumer-climate study improved to a 5.8-points forecast for February, up from 5.7 points in January and better than expected.

Closer home, only stocks from Fast Moving Consumer Goods counter, faring amidst sluggish trade, closed with gains of close to half a percent. Otherwise, rest 12 sectoral indices on BSE failed to stage resilience. Rate sensitive’s tanked after RBI despite lowering its key policy rate, struck a cautious note on further easing as it waits to see how the government controls its fiscal deficit. Meanwhile, corporate earnings were a complete disappointment. Dabur India lost over a percent on reporting mixed results for the third quarter, with consolidated net profit up slightly above street expectations at 22.15 percent year-on-year to Rs 211.11 crore. Additionally, Tata Teleservices (Maharashtra) too took a knock of over 2% on reporting net loss of Rs 197.16 crore for the quarter ended December 31, 2012 as compared to a net loss of Rs 144.62 crore for the same quarter in the previous year. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 1111:1701 while 142 scrips remained unchanged. (Provisional)

The BSE Sensex lost 129.35 points or 0.64% and settled at 19974.00. The index touched a high and a low of 20203.66 and 19970.05 respectively. 6 stocks were seen advancing while 23 stocks were declining and one stock remained unchanged on the index. (Provisional)

The BSE Mid-cap index was down by 0.59% while Small-cap index was down by 0.90%. (Provisional)

 On the BSE Sectoral front, Realty down by 2.27%, Oil & Gas down by 1.33%,  Auto down by 1.21%, TECk down by 0.87% and PSU down by 0.74% were the top losers while, FMCG up by 0.34% was the sole gainers in the space.

The top gainers on the Sensex were Coal India up by 1.58%, ITC up by 1.40%, ICICI Bank up by 0.87%, Hero MotoCorp up by 0.74% and HDFC up 0.52%, while, Hindalco down by 2.70%, Bajaj Auto down by 2.62%, HDFC Bank down by 2.61%, Bharti Airtel down by 2.38% and Gail India down by 2.14% were the top losers in the index. (Provisional)

Meanwhile, caving into growing clamour for a rate cut, Reserve  Bank of India (RBI), in ‘Third Quarter Review of Monetary Policy 2012-13’, dropping its prolonged anti-inflationary stance, went ahead and slashed  repo rate by 25 basis points to 7.75 per cent against 8 per cent earlier.

Consequently, the reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, now stands adjusted to 6.75 per cent with immediate effect. Subsequently, the Marginal Standing Facility (MSF) rate, determined with a spread of 100 basis points above the repo rate, also stood adjusted to 8.75 per cent with immediate effect.

India’s apex bank was widely expected to make a modest cut in interest rates to support an economy set for its slowest growth in a decade, however deeper cut was anyways unlikely due to worries over the fiscal and external deficits and inflation.

What came as a pleasant surprise to the street, was the reduction in cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.25 per cent to 4.0 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning February 9, 2013, a move that would release around Rs 18,000 crore of primary liquidity into the banking system.

Further, with regards to inflation, the RBI in report also stated the possibility to moderate below its projection of 7.5 percent by March-end. However, it added, 'suppressed inflation continues to pose a significant risk to the inflation in 2013-14. As some of the risks materialises, inflation path may turn stick.Since the last cut nine months ago, the RBI has refused to accept pleas from businesses and politicians for further reductions, putting the onus back on the government to take action. But the central bank had held out hope of a cut sometime this quarter after Prime Minister Manmohan Singh's fractious coalition in September ended a horrendous phase of policy inaction to make urgently needed reforms to reduce the fiscal deficit and attract foreign investment. The measures, which included giving foreign players more access to its retail and aviation sectors, helped India avert the threat of a sovereign debt credit rating downgrade to junk status. Recently, as part of an ongoing drive to spruce spending, the government gave oil companies more room to set regulated diesel prices.

Although RBI lowered its key policy rate as expected for the first time in nine months to support an economy set for its slowest growth in a decade, signaled there was less room for aggressive cuts in future due to concerns over inflation.

India VIX, a gauge for markets short term expectation of volatility lost 4.61% at 14.47 from its previous close of 15.17 on Monday. (Provisional)

The S&P CNX Nifty lost 27.85 points or 0.46% to settle at 6,046.95. The index touched high and low of 6,111.80 and 6,042.45 respectively. 14 stocks advanced against 36 declining on the index. (Provisional)

The top gainers on the Nifty were AXIS Bank was up by 4.27%, JP Associate was up by 1.83%, Coal India was up by 1.69%, ITC was up by 1.10% and Asian Paint was up by 0.90%. On the other hand, Bank of Baroda down by 2.89%, Hindalco down by 2.87%, HDFC Bank down by 2.65%, Bajaj-Auto down by 2.43% and Reliance Infrastructure down by 2.33% were the top losers. (Provisional)

Most of European markets were trading in red, France’s CAC 40 down by 0.14% and Germany’s DAX down by 0.07%. On the other hand, the United Kingdom’s FTSE 100 up by 0.18%was the sole loser in space.

Asian shares ended mostly higher on Tuesday as investors indulged in some selective buying ahead of more U.S. economic data and a Federal Reserve policy decision later in the week that may offer clues to the Fed's stimulus plans. Regional markets went home with green mark ahead of official release of manufacturing data for January at the end of the week. However, Hong Kong closed lower, weighed by a fall in Industrial and Commercial Bank of China. Japan’s Nikkei ended in positive territory, as Japanese construction machinery companies were higher on Tuesday, while South Korea's Kospi closed higher, ending a four-day losing streak.