Indian equities dives after RBI hikes repo rate

Indian equities slipped deep into the red as the Reserve Bank of India dashed hopes of a dovish stance that the Street had been expecting given the US Fed maintaining a status quo on QE tapering. The RBI has cut MSF by 75 bps to 9.5%. It has hiked repo rate by 25 bps to 7.5%. Cash reserve ratio (CRR) has however been left unchanged at 4%. The move points to the fact that the RBI is focused on taming a high inflation. The RBI said the steps keeping in mind the value of the rupee and inflationary pressures. It said there is no room for complacency, and more action on liquidity will depend on how the rupee moves .Reverse repo rate has been hiked to 6.5% from 6.25%. Meanwhile, the rupee weakened against the dollar after rallying to one-and-half month high in previous session. The partially convertible rupee was at Rs 62.42.

Global cues too remained choppy with the US markets ending mixed overnight after a rally induced by Fed’s decision to keep the bond buying programme intact. Stocks traded in a relatively lackluster manner throughout the session, though a batch of economic data came positive. Moreover, of the few Asian equity counters that were trading, mostly were in the negative terrain in Friday’s morning deals with Japanese markets were trading slightly in the red with investors treading cautiously amid doubts about the near-term outlook for the market after Thursday’s sharp up-move.

Back home, traders were buying, Power, IT and Health Care while selling were seen in Metal, Auto and Capital Goods on the BSE. BSE Sensex and NSE Nifty were comfortably trading near their psychological 6,100 and 20,000 levels respectively. Stocks related to textile and apparel industry were trading higher as Apparel Export Promotion Council (AEPC) has reported that the industry is witnessing an upswing and the exports are likely to go up from $13 billion last year to $17 billion in the next two years on the back of economic recovery in the US and Europe.

The market breadth on BSE remains neutral with advances to declines in the ratio of 833:837.The BSE Sensex is currently trading at 20607.40, down by 39.24 points or 0.19% after trading in a range of 20649.38 and 20551.89. There were 13 stocks advancing against 17 declines on the index. The broader indices were trading in green; the BSE Mid cap index was up by 0.16% and Small cap index gained 0.18%.

The top gaining sectoral indices on the BSE were, Power up by 0.97%, IT up by 0.72%, Health Care up by 0.59%, Teck up by 0.39% and Oil & Gas up by 0.17%, while Metal down by 0.86%, Auto down by 0.64%, Capital Goods down by 0.56%, FMCG down by 0.46% and PSU down by 0.35% were the top losers on the sectoral index.

The top gainers on the Sensex were BHEL up by 2.88%, Gail India up by 1.52%, Sun Pharma up by 1.43%, Wipro up by 1.38%, SBI up by 1.16% .On the flip side, Maruti Suzuki was down by 2.38%, Hero MotoCorp was down by 2.19%, Bajaj Auto was down by 2.03%, Sesa Goa was down by 2.02% and ONGC was down by 1.74% were the top losers on the Sensex.

Meanwhile, Concerned over the recent hike in raw material cost, Indian plastic industry is seeking a 30 per cent increase in working capital loans from banks. Industry members plan to meet the RBI Governor soon to reiterate their demand as current volatility in crude prices and deprecation of the rupee has enhanced the raw-material costs, thus making manufacturing of plastic products unviable for the industry. Indian plastic industry has an annual turnover of Rs 90,000 crore and produces over 90 lakh tonnes of plastics.

Secretary of the All India Plastics Manufacturers’ Association, Hiten Behda, said that most of manufacturers fall in the small and medium enterprises category and do not get adequate bank loans for meeting their working capital requirements. He further suggested that the cap on bank loans should be removed and credit should move more freely to the industry. 

Behda stressed that the import duty on polymers, a raw material for the industry, should be reduced from 7.5 to 5 per cent. By adding further, he said that domestic industry is also facing competition from manufacturers in China and Thailand as they are dumping their cheap goods in the Indian market. Therefore, the government must immediately levy a 20 percent duty on finished plastic goods. Suggesting further, the anti-dumping duty on PVC resin to be completely scrapped, added that Indian plastic manufacturer are getting loans with interest rates as high as 18 percent, while the Chinese interest rates are at 7 per cent.

The CNX Nifty is currently trading at 6,110.55 down by 5.00 points or 0.08% after trading in a range of 6,120.25 and 6,087.95. There were 24 stocks advancing against 26 decline on the index.

The top gainers of the Nifty were BHEL up by 2.95%, UltraTech Cement up by 2.78%, Lupin up by 2.69%, HCL Tech up by 2.64%, and GAIL up by 1.75%. On the flip side, Ranbaxy down by 4.79%, JP Associate down by 2.95%, Hero MotoCorp down by 2.53%, Bajaj-Auto down by 2.39% and Sesa Goa down by 2.07% and were the major losers on the index.

Most of the Asian equity indices were trading in red; Jakarta Composite declined 56.02 points or 1.20% to 4,614.71, Nikkei 225 slipped 26.65 points or 0.18% to 14,739.53 and Straits Times was down by 20.88 points or 0.64% to 3,230.90.

On the flip side, KLSE Composite was up by 9.36 points or 0.52% to 1,802.27.

Markets in China, Hong Kong, South Korea and Taiwan remained closed for the trade on public holidays.