Markets languish near day’s low; Sensex trades sub 19500 level

In a knee-jerk reaction to RBI’s credit policy, benchmarks are now languishing near day’s low, with a cut of around half a percent.  Downward revision of GDP growth by Reserve Bank of India in its ‘first quarter review of Monetary Policy 2013-14’ apparently did not augur well with the Street, which despite getting inline credit policy, was booking profits. Much of the pressure came from the stocks belonging to Public Sector Undertaking, Realty and Power counters, while those from Information Technology, Capital Goods and Technology space were limiting the further slide of the bourses.  Sensex, losing close to century of points, was trading below the psychological 19,500 level, while Nifty, too declining with similar magnitude, was just holding above the crucial 5800 bastion. Broader indices, showing a degree of underperformance, were down and out with a cut of around a percent.

Underperforming the globe, Indian equity markets had been trading cautiously since the start of the trade, though relief rally was witnessed after release of RBI’s monetary policy, but that too proved momentary. However, a positive start of European markets could bring some relief as market attention will now be on the US central bank’s policy meeting which starts on Tuesday, which could indicate when the Fed’s massive asset purchase program will be tailed back.  The overall market breadth on BSE is in the favour of declines which thumped advances in the ratio of 1266:649; while 121 shares remained unchanged.

The BSE Sensex is currently trading at 19494.63, down by 98.65 points or 0.50% after trading in a range of 19672.72 and 19471.12. There were 11 stocks advancing against 19 declines on the index.

The broader indices too have enlarged their losses; the BSE Mid cap and Small cap indices were trading lower by 1.05% and 0.94% respectively.

The top gaining sectoral indices on the BSE were, IT up by 0.99%, Capital Goods up by 0.21%, Teck up by 0.20% while PSU down by 2.00%, Realty down by 1.94%, Power down by 1.79%, FMCG both down by 1.59% and Oil & Gas down by 1.58%, were the top losers on the BSE.

The top gainers on the Sensex were Jindal Steel up by 2.08%, L&T up by 1.97%, Wipro up by 1.41%, Infosys up by 1.19% and TCS up by 0.80%. On the flip side, Gail India down by 4.15%, ONGC down by 3.78%, Hindalco Industries down by 3.26%, Bharti Airtel down by 2.71% and Bajaj Auto was down by 2.56% were the top losers on the Sensex.

Meanwhile,acting prisoner to the external environment, Reserve Bank of India (RBI), in its ‘First Quarter Review of Monetary Policy 2013-14’, once again did the expected, by maintaining status quo on key rates. Thus for the second time, Repo and Revere Repo rate stand unchanged at 7.25% and 6.25% respectively. Further, Marginal Standing Facility (MSF) Rate, Bank Rate too have been retained at 10.25% each, while Cash Reserve Ratio (CRR) was held out at 4% of their net demand and time liabilities (NDTL).

RBI’s policy was along expected line or rather a dovish one, as country’s Apex Bank, in its document released ahead of the monetary policy review had clearly stated that it would endeavor to actively manage liquidity to reinforce monetary transmission that is consistent with the growth-inflation balance and macro-financial stability.

Though in its guidance, RBI underscored that the recent liquidity tightening measures aimed at checking undue volatility in the foreign exchange market, will be rolled back in a calibrated manner as and when the stability is restored to the foreign exchange market. RBI, in a bid to curb Rupee’s slide, took a number of measures including capping allocation of funds under LAF for each individual bank to 0.50% of its own NDTL, increasing marginal standing facility (MSF) rate and bank rate by 200 bps each to 10.25% and mopping up some liquidity through open market operations (OMO) sales and stipulating banks to maintain a minimum daily CRR balance of 99% of the average fortnightly requirement.

However, raising some concern about the health of the economy, the central bank lowered the growth projection for 2013-14 to 5.5% from 5.5% earlier and highlighted the re-emergence of inflation pressures. It said, although the inflation trajectory moved largely in line with expectations, some risks to the path of inflation have surfaced in June.

Reserve Bank of India for the second consecutive review left key policy rates unchanged. This stance clearly shows that the central bank's policy focus has shifted from reviving economic growth to defending  weak rupee that hit a record low of 61.21, depreciated close to 10% from the start of this year, turning out to be one of the worst performing Asian currency.

The CNX Nifty is currently trading at 5,804.10, down by 27.55 points or 0.47% after trading in a range of 5,861.30 and 5,795.95. There were 14 stocks advancing against 36 declines on the index.

The top gainers of the Nifty were L&T up by 2.09%, Jindal Steel up by 2.08%, Infosys up by 1.23%, HCL Technologies up by 1.19% and Axis Bank up by 1.02%. On the flip side, BPCL down by 5.16%, Ranbaxy down by 4.34%, GAIL India down by 4.33%, ONGC down by 3.68% and DLF down by 3.87% were the major losers on the index.

The Asian equity indices were trading in green; Shanghai Composite up by 0.70%, Hang Seng up by 0.13%, Jakarta Composite up by 1.05%, Nikkei 225 up by 1.53%, Straits Times up by 0.12%, Seoul Composite up by 0.90%  and Taiwan Weighted added 0.98%, while, KLSE Composite slipped 0.21%.

European markets got off to a positive start; with CAC 40 adding 0.39%, DAX rising 0.34% and FTSE 100 gaining 0.22%