Sensex dives first time in last four sessions on RBI’s hawkish stance

Stock markets in India staged an unenthusiastic performance on the last trading session of the first week of new F&O series as the frontline equity gauges shed about a percent after amassing over two percentage points in the last three sessions on back of profit-booking in rate sensitive sectors such as banks, real-estate and auto after the central bank’s policy action. The benchmark gauges, which traded with huge volatility, drifted lower for the first time in last four trading sessions and settled near their intraday low, breaching  the psychological 19,600 (Sensex) and 5,950 (Nifty) levels as investors took to largely across the board profit booking.

Sentiments in the session got undermined after Reserve Bank of India (RBI) in its monetary policy review reduced repo rates by much-anticipated 25 basis points but hinted towards a little room for future policy easing. However, the central bank kept Cash Reserve Ratio (CRR) unchanged. In the annual monetary policy for 2013-14, RBI also cut the ceiling on total SLR securities held under the HTM category to 23 per cent of net demand and time liabilities (NDTL) from 25 per cent earlier.

However, global cues remained supportive as European counters traded firmly in the early deals after ECB President Mario Draghi on April 2, 2013 said the ECB stood ready to ease further if needed, dealing a blow to the euro currency as investors looked elsewhere for better returns. The ECB’s decision came a day after the Federal Reserve recommitted to its aggressive stimulus programme and a month after the Bank of Japan stunned markets by promising to inject about $1.4 trillion into the economy to spur growth. Asian markets too shut shop mostly in green with Shanghai Composite garnering a gain of over one and a half percent on relief buying spread across various sectors, after dropping in five of the last six sessions.

Back home, selling in the late trade intensified after investors continued offloading their holdings in rate sensitive counters viz. banking, realty and auto after the RBI said there is little room to ease monetary policy further. RBI has also warned that the risk of inflationary pressure persists despite a recent sharp decline in wholesale price index (WPI) inflation, and said a high current account deficit poses the biggest risk by far to the Indian economy. Bucking the trend, software and technology pack witnessed some traction during the trade after Indian rupee depreciated 17 paise to 53.98 against the dollar on the Interbank Foreign Exchange market due to appreciation of the US currency against other currencies overseas. The dollar’s movement affects the IT index as US is the biggest market for the IT service industry.

The NSE’s 50-share broadly followed index Nifty declined by over fifty points to end below its psychological 5,950 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex dropped by one hundred and sixty points to finish below its psychological 19,600 mark. The broader markets too struggled to get some traction and ended the session in red.

The overall volumes stood at over Rs 1.88 lakh crore, which remained on the higher side as compared to that on Thursday. The market breadth remained in favour of declines as there were 1,027 shares on the gaining side against 1,339 shares on the losing side, while 137 shares remain unchanged.

Finally, the BSE Sensex lost 160.13 points or 0.81% to settle at 19,575.64, while the CNX Nifty declined by 55.35 points or 0.92% to end at 5,944.00.

The BSE Sensex touched a high and a low of 19,744.85 and 19,542.63, respectively. The BSE Mid cap index down by 0.26% and Small cap index was down by 0.39%.

The top gainers on the Sensex were, Jindal Steel up by 4.22%, Hindalco up by 2.30%, Tata Steel up by 2.22%, Sun Pharma up by 1.84% and Sterlite Industries up by 1.36%, while Tata Motors down by 3.76%, SBI down 3.60%, ICICI Bank down 3.57%, Gail India down 2.99% and Bajaj Auto down by 2.56% were the top losers on the index.

The top gainers on the BSE Sectoral space were Metal up 1.44%, Capital Goods up 0.92%, TECk up 0.49%, IT up 0.44% and Health Care up 0.22%, while Bankex down 2.40%, PSU down 1.52%, Auto down 1.50%, Realty down 1.39% and Consumer Durables down 1.06% were the top losers on the sectoral space.

Meanwhile, after turning down the proposal of coal price pooling of domestic and imported coal, which would have made the fuel reasonably priced to new power plants, the government is now planning to pool coal supplies and pass higher import costs on to tariff. As per the Planning Commission Deputy Chairman Montek Singh Ahluwalia, the imported coal is more expensive than domestic coal, so the higher cost of imported coal will passed on in the tariff.

By adding further, Ahluwalia said that it would be some kind of average price as the available domestic coal, which is priced lower, will be distributed among different people and the balance (shortfall) will have to be made up through imports.  Last month, the Cabinet Committee on Economic Affairs (CCEA) had turned down the proposal of coal pricing pooling owing to sharp opposition to the scheme. The proposal was being opposed for various reasons by older power plants and domestic coal producers as the proposal will remove the advantage that old power projects enjoyed as compared to newer ones.

As per the CCEA meeting, the power projects commissioned before 2009 will continue to get coal at pre-fixed (below market) rates. While, the new projects, commissioned after 2009 largely have a cost-plus mechanism for calculation of electricity tariff and so any higher imported cost of coal will be passed through to the consumers. This may lead to increase in electricity tariffs if the generation companies pass the rise in cost to the consumers. 

The CNX Nifty touched a high and a low of 6,000.30 and 5,930.15 respectively. 

The top gainers on the Nifty were Jindal Steel up by 3.81%, Hindalco up 2.34%, Tata steel up 2.22%, HCL Tech up 2.21% and Sesa Goa up by 1.90%.

On the flip side, the top losers of the index were, Tata Motors down 3.99%, SBI down 3.80%, IDFC down 3.73%, ICICI Bank down 3.56% and DLF down by 3.41%.

The European markets were trading in green, France’s CAC 40 up by 0.13%, the United Kingdom’s FTSE 100 up by 0.24% and Germany’s DAX up by 0.18%.

Asian markets ended mixed on Friday amid upbeat jobs data and a rate cut by the European Central Bank. China’s Shanghai Composite went home with green mark on relief buying spread across various sectors, after dropping in five of the last six sessions. South Korea's Kospi Composite closed higher as telecom stocks gave a boost after positive earnings results.

Japanese financial markets remained closed for holidays.