Benchmarks witness consolidation; Fed policy eyed

Domestic benchmarks, a day after the Reserve Bank of India (RBI) cut key lending rates in its third quarterly review of monetary policy, witnessed consolidation on penultimate day of F&O expiry. Though, domestic bourses re-conquered their crucial 6,050 (Nifty) and 20,000 (Sensex) levels as some support came in from finance minister P Chidambaram’s statement that the government will present a responsible budget next month. Finance Minister has also said that government will cut fiscal and current account deficits to help economy return to the 8 percent growth path. Sentiments also got some boost after foreign institutional investors (FIIs) bought shares worth a net Rs 899.83 crore on January 29, 2013. However, the gains remain capped as risk appetite was frail after the RBI made further rate cuts conditional on government moves to control fiscal deficit. The investors also stayed cautious ahead of US Federal Reserve’s monetary policy decision due later in the day.

Global cues remained mixed as European counters traded lower in the early deals. However, most of the Asian equity indices shut shop in the green terrain boosted by improved economic outlook. Japan’s Nikkei closed with strong gains attaining its highest closing since late April 2010, as the yen continued to weaken against the US dollar. South Korea’s Kospi ended higher, after the government said manufacturing output rose 0.8% in December from November.

Back home, buying in index heavyweights like Reliance Industries (RIL) and ICICI Bank too supported the frontline gauges. RIL recovered from a four-sessions losing streak, while ICICI Bank rose a day ahead of its quarterly earnings results. Interest rate sensitive banking and realty shares edged higher as the RBI announced a 25 basis points reduction in its key policy rate viz. the repo rate on January 29, 2013. Rise in metal counters too aided the sentiments as stocks like Sesa Goa, Sterlite Technologies, Tata Steel and Coal India edged higher as global metal prices increased.

Sentiments also got lifted after export oriented companies like Titan Industries, Arvind and Rajesh Exports all edged higher as Reserve Bank Governor D Subbarao expressed worries over low share of export credit in the books of banks, constituted a technical advisory group to look for solutions to help the sector. However, selling in software and technology counters limited the gains as stocks like Infosys, HCL Technology, Satyam Computers and Mphasis edged lower as rupee rose to its highest level in more than three months on Wednesday on the back of dollar inflows and positive sentiment from a stronger euro.

The NSE’s 50-share broadly followed index Nifty gained only five points to end tad above its psychological 6,050 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex rose by over ten points, ending above its psychological 20,000 mark. However, the broader markets traded in the negative trajectory during the trade and ended the session slightly in the red.

The overall volumes stood at over Rs 2.38 lakh crore, which remained on the lower side as compared to that on Tuesday. The market breadth remained in favor of declines as there were 969 shares on the gaining side against 1,219 shares on the losing side while 828 shares remain unchanged.

Finally, the BSE Sensex gained 14.10 points or 0.07% to settle at 20,005.00, while the S&P CNX Nifty rose by 5.85 points or 0.10% to end at 6,055.75.

The BSE Sensex touched a high and a low of 20,073.46 and 19,964.64, respectively. The BSE Mid cap index down by 0.03% and Small cap index was down by 0.21%.

The top gainers on the Sensex were, Cipla up by 2.69%, Hindustan Unilever up by 1.97%, Reliance up by 1.87%, Tata Steel up by 1.75% and Wipro up by 1.72%, while Gail India down by 3.35%, Tata Power down by 2.73%, L&T down by 1.92%, Jindal Steel down 1.61% and Tata Motors down by 1.53% were the top losers on the index.

The top gainers on the BSE Sectoral space were Realty up 1.39%, Consumer Durables up 1.24%, Oil & Gas up 1.06%, Bankex up 0.36% and Health Care up by 0.36%, while Capital Goods down 1.24%, Power down 0.68%, Auto down 0.49%, TECk down 0.18% and PSU down 0.07% were top losers on the sectoral space.

Meanwhile, to enhance the share of export credit in the books of banks, Reserve Bank Governor D Subbarao on January, 29 constituted a technical advisory group to look for solutions to help the export orientated sector. Worried over the declining export, Subbarao said that the burgeoning current account deficit as 'biggest risk for inflation and macroeconomic management'.

The RBI governor D Subbarao said that banks' exposure to the exports sector still stands at a poor 5 percent or less in some cases, even when the RBI has allowed them to go up to 12 percent. By adding further, Subbarao said ‘apart from cost of financing, there are a number of non-cost issues for export sectors like transaction costs, accounting norms, documentation required, procedural difficulties. So, we decided to constitute a technical working group to go into these issues.’

The constituted technical advisory group will be headed by RBI Executive Director G Padmanabhan. Apart from officials from the central bank, the committee will also be represented by Export Credit Guarantee Corporation, the Exim Bank, the Indian Banks Association and the Federation of Indian Exporters Organisation.

Further, as per the governor, in the last six months, the apex bank has taken certain steps to improve the export like raising the rupee export credit refinance facility to 50 percent from 15 percent and the recent dollar-rupee swap facility to $6.5 billion.

The S&P CNX Nifty touched a high and a low of 6,071.95 and 6,044.15 respectively.

The top gainers on the Nifty were DLF up by 3.00%, Cipla up by 2.41%, ACC up by 2.31%, Sesa Goa up by 2.26% and Ambuja Cement up by 2.26%.

The top losers of the index were GAIL down by 3.29%, PNB down by 3.03%, Tata Power down by 2.96%, L&T down by 2.17% and Jindal Steel down by 1.96%.

The European markets were trading mixed, France’s CAC 40 down by 0.09%, United Kingdom’s FTSE 100 up by 0.05% points and Germany’s DAX down by 0.14%.

Most Asian markets went home with a green mark on Wednesday with an improved economic outlook, lifting stocks in Hong Kong and Australia to near two-year highs. Japan's Nikkei closed with strong gains attaining its highest closing since late April 2010, as the yen continued to weaken against the U.S. dollar. South Korea’s Kospi ended higher, after the government said manufacturing output rose 0.8% in December from November. Meanwhile, investors looked optimistic ahead of the outcome of the Federal Reserve’s two-day policy meeting later in the day.