Indian markets witness rebound in early trade on rate cut hopes

Indian equity indices have made a positive start, as wave of recovery on Tuesday’s morning trade was witnessed after previous session’s steep fall. Investors seen piling up positions in rate sensitive stocks like banking, auto and realty as there is wide expectation that central bank in its last mid-quarter review of monetary policy for fiscal 2013, will announce a 25 basis points cut in repo rate. However, a recent uptick in headline wholesale inflation, rising food price-driven consumer inflation and a record-high current account deficit are seen limiting the RBI's space for more aggressive monetary easing. Some support also came in from Finance Minister P Chidambaram’s statement that the government is considering further liberalizing foreign investment cap in various sectors.

Global cues too remained supportive as all the Asian counters rallied on Tuesday’s morning trade, as investors got some boost after Euro group decided to give Cyprus more flexibility over a bank levy which is part of the bailout conditions. Meanwhile, Japanese Nikkei has taken the lead with a gain of about two percent as exporters gained after the yen weakened against the dollar, boosting their earnings outlook. Though, US markets declined overnight and major indices lost about another half a percent as a bailout agreement for Cyprus raised concerns about the Europe.

Back home, on the sectoral front, realty witnessed the maximum gain in trade followed by auto and banking while, metal, public sector undertaking and software remained the top losers on the BSE sectoral space. The broader indices were going neck-to-neck with benchmarks while, the market breadth on the BSE was positive; there were 934 shares on the gaining side against 723 shares on the losing side while 96 shares remain unchanged.

The BSE Sensex opened at 19,345.91; about 52 points higher compared to its previous closing of 19,293.20, and has touched a high and a low of 19,378.61 and 19,319.51 respectively.

The index is currently trading at 19,339.45, up by 46.25 points or 0.24%. There were 18 stocks advancing against 12 declines on the index.

The overall market breadth has made a strong start with 53.28% stocks advancing against 41.24% declines. The broader indices were trading in-line with benchmarks; the BSE Mid cap and Small cap indices rose by 0.21% and 0.25% respectively. 

The top gaining sectoral indices on the BSE were, Realty up by 0.84%, Auto up by 0.77%, Bankex up by 0.55%, Health Care up by 0.50% and FMCG up by 0.32% while, Metal down by 0.48%, PSU down by 0.22%, IT down by 0.12% and Teck down by 0.09% were the only loser on the index.

The top gainers on the Sensex were Gail India up by 1.86%, ICICI Bank up by 1.75%, Sun Pharma up by 1.72%, Bajaj Auto up by 1.72% and Tata Motors up by 1.84%.

On the flip side, Coal India was down by 1.92%, BHEL was down by 1.22%, TCS was down by 1.03%, ONGC was down by 0.76% and Dr Reddys Lab was down by 0.74% were the top losers on the Sensex.

Meanwhile, Moody’s Investors Service in a report has said that India's high food inflation is negative for the country's sovereign ratings and it has a potential to hurt government finances and monetary policy flexibility. Sustained food inflation poses a threat because it exacerbates the country’s macroeconomic challenges of slowing growth, high inflation and large fiscal and current account deficits, the report added.

Further, the report underscored that even if non-food inflation growth pace is slowing down, sustained food inflation over several quarters, as in India, can ultimately revive non-food inflation, if wages increase in response to a rising cost of living. It also stated that high inflation curbs the extent to which the central bank may lower interest rates, to revive the sagging economic growth. These comments assume significant importance as they come a day prior to Central bank announcing its mid-quarter monetary policy review.

To highlight, Moody's is the only major credit agency to rate India with a 'stable' outlook, while other two major agencies, Fitch Ratings and Standard and Poor's Ratings Services have reduced their outlook on India to 'negative' from 'stable' last year.  Meanwhile, the non-food manufacturing inflation or core inflation slowed to 3.8%, India’s wholesale price inflation for food eased slightly to 11.4% in February, slightly lower than January’s 11.9%, second highest in two years.

The CNX Nifty opened at 5,859.50; about 24 points higher as compared to its previous closing of 5,835.25, and has touched a high and a low of 5,863.60 and 5,841.65 respectively.

The index is currently trading at 5,843.60, up by 8.35 points or 0.14%. There were 28 stocks advancing against 22 declines on the index.

The top gainers of the Nifty were Gail up by 1.94%, Bajaj-Auto up by 1.82%, Sun Pharmaceuticals up by 1.80%, ICICI Bank up by 1.72% and IDFC up by 1.35%.

On the flip side, Coal India down by 1.82%, TCS down by 1.19%, BHEL down by 1.10%, Cairn down by 1.06% and ONGC down by 0.90%, were the major losers on the index.

All Asian equity indices were trading in the green; Shanghai Composite rose 5.06 points or 0.23% to 2,245.08, Hang Seng jumped 70.52 points or 0.32% to 22,153.88, Jakarta Composite surged 25.35 points or 0.53% to 4,828.17, KLSE Composite increased 3.96 points or 0.24% to 1,625.32, Nikkei 225 zoomed 233.32 points or 1.91% to 12,453.95, Straits Times added 23.11 points or 0.71% to 3,279.58, KOSPI Composite soared 17.25 points or 0.88% to 1,985.43 and Taiwan Weighted was up by 41.22 points or 0.53% to 7,852.56.