Benchmarks continue lackadaisical trade; RBI delivers 25 bps repo rate cut; CRR untouched

Indian equities continued lackadaisical trade below neutral line in the late morning session. On the global front, Asian markets were trading higher at this point of time after an interest rate cut by the European Central Bank added to hopes that more stimulus from yet another major central bank will help shore up the global economic recovery. Back home, In order to prod sputtering economy, the Reserve Bank of India (RBI) in its monetary policy review, yet again delivered 25 basis points repo rate cut, while keeping the Cash Reserve Ratio (CRR) unchanged. Thus, repo rate under the liquidity adjustment facility (LAF) now stands to be reduced from 7.5 per cent to 7.25 per cent with immediate effect.

Consequently, the reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, stands adjusted to 6.25 per cent with immediate effect. Meanwhile, the CRR of scheduled banks has been retained at 4.0 per cent of their net demand and time liabilities (NDTL).

The traders were seen piling up positions in IT, Teck and Consumer Durables, while selling was seen in Realty, Bankex and Auto sector. In scrip specific actions, Andhra Bank surged after it reported a marginal jump of 1.5 per cent in net profit at Rs 345 crore for the fourth quarter ended March 31, 2013. Bharti Airtel soared after the company agreed to sell a 5 percent stake to Qatar Foundation Endowment for $1.26 billion. Cement stocks such as ACC and Ambuja Cements gained ahead of results later in the day. Gujarat Pipavav Port rose on the back of strong January-March quarter earnings. Its net profit grew to Rs 35.4 crore from Rs 14.1 crore year-on-year.RIL dropped after Sebi fined RIL entity Rs 11 crore in insider trading case. Kingfisher Airlines slumped after banks invoked Mallya’s personal guarantees. Housing Development Finance Corp, State Bank of India was trading in red ahead of RBI policy.

Meanwhile, the NSE Nifty and BSE Sensex were trading just above their psychological 5,950 and 19,600 levels respectively. The market breadth on BSE was showing positive trend with advances to declines in ratio of 1271: 1117.

The BSE Sensex is currently trading at 19634.43, down by 101.34 points or 0.51% after trading in a range of 19731.63 and 19623.44. There were 8 stocks advancing against 22 declines on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.53% and Small cap index was down by 0.11%.

The only gaining sectoral indices on the BSE were, IT up by 0.58%, Teck up by 0.58%, Consumer Durables up by 0.24% and Health Care up by 0.24% while, Realty down by 1.65%, Bankex down by 0.21%, Auto down by 1.13%, PSU down by 0.82% and Metal down by 0.44% were the losers on the BSE.

The top gainers on the Sensex were NTPC up by 1.12%, Bharti Airtel up by 0.76%, TCS up by 0.62%, Infosys up by 0.57%, and Jindal Steel up by 0.46%. On the flip side, SBI was down by 2.39%,Tata Motors was down by 2.26%, ICICI Bank was down by 1.69%, HDFC was down by 1.28% and BHEL was down by 1.28% were the top losers on the Sensex.

Meanwhile, expressing concerns over steadily falling savings and investment rates, the Reserve Bank of India (RBI), in its annual Macroeconomic and Monetary Developments report, highlighted that financial savings by households, which slipped to 22.3% in 2011-12 was mainly on account of households resorting to physical assets as a hedge against inflation.

As per the report, household savings declined from a high 25.2% in 2009-10 to 22.3% in 2011-12. It had stood at 23.5% in 2010-11. On the other hand, savings in physical assets continued its steady rise and touched 14.3% in the reporting year from 13.1% a year before and 13.2% in 2009-10.   

Apart from this, persistence of high inflation with average headline inflation at about 9% in 2011-12 withered financial savings as households attempted to stave off the downward pressure on their real consumption. The report also notes with concern that the core sectors-public and private witnessed a slowdown in savings, apart from an overall decline in investment rates during 2011-12.

The decline in savings was more visible in the private corporates, at 7.2% in the 2011-12 from 7.9% a year before and 8.4% in 2009-10. On the other hand, the public sector fared a tad better with their savings rate at 1.3%, declined from 2.6% the year before but a steady improvement from the dismal 0.2% in 2009-10.

Regarding the investment, the report said that the decline in the rate of investment in 2011-12 was mainly due to decline in the investment rate of private corporate sector followed by that of the public sector even as the household investment rate increased. ‘The increase in investment in valuables continued in 2011-12 and exhibited a sharper rise, partly contributing to the high current account deficit in 2011-12’ it added.

Further, the report said that the gross capital formation declined to 35.5% in the reporting period from 36.8% in 2010-11 and 36.5% in 2009-10. The households kept on parking their money in physical assets, there was a tangible increase in the gross capital formation by households to 14.3% during the reporting period, up from 13.1% in 2010-11 and 13.2% in 2009-10.

The CNX Nifty is currently trading at 5,967.20 down by 32.15 points or 0.54% after trading in a range of 6,000.30 and 5,963.45. There were 14 stocks advancing against 35 declines while 1 stock remains unchanged on the index. 

The top gainers of the Nifty were HCL Tech up by 1.64%, Lupin up by 1.28%, NTPC up by 1.22%, Ambuja Cements up by 2.00% and Bharti Airtel up by 0.88%. On the flip side, SBI down by 2.57%, JP Associate down by 2.52%, IDFC down by 2.46%, Tata Motors down by 2.40%, Reliance Infrastructure down by 2.25% and were the major losers on the index.

Most of the Asian equity indices were trading in green; Shanghai Composite surged 39.37 points or 1.81% to 2,213.49, Hang Seng rose 155.40 points or 0.69% to 22,823.70, KOSPI Composite increased 1.76 points or 0.09% to 1,958.97 and Taiwan Weighted was up by 17.60 points or 0.22% to 8,146.11.

On the flip side, Jakarta Composite declined 40.26 points or 0.81% to 4,953.79, KLSE Composite dropped 15.59 points or 0.91% to 1,697.87 and Straits Times was down by 21.75 points or 0.74% to 3,377.30.

Japanese Nikkei remained shut for the trade today.