Benchmark continue choppy trade after RBI monetary policy

Benchmarks after exhibiting volatile trade are now trading flat in late morning session post the announcement of RBI’s first quarter review of Monetary Policy. The central bank has maintained status quo, by keeping the CRR and repo rate unchanged. This is in line with market expectations. RBI has also lowered its Gross Domestic Product (GDP) forecast for FY14 to 5.5 per cent from 5.7 per cent earlier. RBI said that it can revert to supporting growth with continuing vigil on inflation. The effect of the Reserve Bank's recent interest rate increase and liquidity tightening to bolster the rupee will fizzle out if the government does not move to reduce external trade imbalances. It will be a hard road to economic recovery as business confidence is low, and rising global interest rates may throw the financial markets out of gear.On the global front, most of the Asian equity indices were trading in the green at this point of time as sentiments remained up-beat after Chinese central bank injected funds into money markets via open market operations for the first time since February, easing fears of another cash crunch ahead of the month end after a severe cash squeeze in June caused market panic. Back home, traders were seen piling up positions in IT, Health Care and Teck, while selling was seen in Realty, FMCG and PSU sector. Meanwhile, the NSE Nifty and BSE Sensex were trading near the psychological 5,800 and 19,600 levels respectively. The market breadth on BSE was showing negative trend with advances to declines in the ratio of 604:893. The BSE Sensex is currently trading at 19608.67, up by 15.39 points or 0.08% after trading in a range of 19625.59 and 19553.27. There were 15 stocks advancing against 15 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 lost 0.44%.

The top gaining sectoral indices on the BSE were, IT up by 0.91%, Health Care up by 0.58%, Teck up by 0.50%, Capital Goods up by 0.30% and Bankex up by 0.12%, while Realty down by 1.04%, FMCG down by 0.67%, PSU down by 0.49%, Power down by 0.45% and Auto down by 0.45% were the losers on the BSE.

The top gainers on the Sensex were Jindal Steel up by 3.34%, Sun Pharma up by 1.44%, L&T up by 1.35%, Infosys up by 1.34% and Wipro up by 0.88%. On the flip side, Gail India was down by 2.14%, Hindustan Unilever was down by 1.77%, Bharti Airtel was down by 1.65% ,Bajaj Auto was down by 1.57% and Sterlite Industries was down by 1.49% were the top losers on the Sensex.

Meanwhile, amid the concerns that Reserve Bank of India (RBI) will now focus on shoring up rupee, Chief Economic Adviser to Finance Ministry Raghuram Rajan, has said that the RBI action to put stability in the exchange rate must not hurt domestic economic growth too much.

Indicating at a status-quo in July 30 policy review, the central bank’s first quarter macroeconomic and monetary development report said ‘the priority for monetary policy now is to restore stability in the currency market so that macro- financial conditions remain supportive of growth’ even though RBI admitted that Indian economy’s growth recovery is likely to be slower.

In last two weeks RBI has came up with various measures and lifted short-term rates to support the currency, making it harder for lenders to access funds. Raghuram Rajan said that “But, of course we have to be careful that the stability does not come with a serious consequence to growth.” 

The CNX Nifty is currently trading at 5,839.30 up by 7.65 points or 0.13% after trading in a range of 5,844.75 and 5,822.55. There were 20 stocks advancing against 30 declines on the index.

The top gainers of the Nifty were Jindal Steel up by 3.46%, HCL Tech up by 1.80%, Axis Bank up by 1.60%, Sun Pharmaceuticals up by 1.51%, and Infosys up by 1.43%. On the flip side, JP Associate down by 3.27%, NMDC down by 2.43%, DLF down by 2.42%, GAIL down by 2.41% and BPCL down by 2.09% were the major losers on the index.

Most of the Asian equity indices were trading in green; Shanghai Composite surged 20.70 points or 1.05% to 1,997.00, Hang Seng rose 146.17 points or 0.67% to 21,996.32, Jakarta Composite jumped 57.27 points or 1.25% to 4,637.74, Nikkei 225 soared 192.08 points or 1.41% to 13,853.21, Straits Times increased 3.94 points or 0.12% to 3,240.65, Seoul Composite added 14.81 points or 0.78% to 1,914.70 and Taiwan Weighted was up by 71.75 points or 0.89% to 8,156.25.

On the flip side, KLSE Composite was down by 3.82 points or 0.21% to 1,794.96.