RBI move fuels rally on Dalal Street; Sensex reclaims 20,000 mark

Benchmarks continue to remain firm led by gains in rate-sensitive sectors after the Reserve Bank of India reduced the rate under the marginal standing facility (MSF) by 50 basis points to 9 per cent and introduced lending to banks for seven days and 14 days, instead of the current practice of just a day. Sentiments got boosted after the rupee edged higher against the dollar. The partially convertible rupee was hovering at 61.685, compared with its close of 61.79/80 on Monday.

On the global front, the US markets ended lower with major indices losing about a percent, as lawmakers failed to make any progress on resolving the impasse over a government spending bill. While, most of the Asian equity benchmarks were trading in the green despite sluggish opening as investors opted to buy beaten down but fundamentally strong stocks, the gains, however remained capped amid concerns about the looming U.S. debt ceiling deadline. Back home, traders were buying, Realty, Bankex and Capital Goods while selling was seen in Metal and Oil & Gas on the BSE. The market breadth on BSE remains positive with advances to declines in the ratio of 1090: 604. BSE Sensex and NSE Nifty were comfortably trading near their psychological 20,000 and 5,950 levels respectively.  

The BSE Sensex is currently trading at 20052.56, up by 157.46 points or 0.79% after trading in a range of 20150.27 and 20034.52. There were 23 stocks advancing against 7 declines on the index. The broader indices were trading in green; the BSE Mid cap index was up by 0.51% and Small cap index gained 0.51%.

The top gaining sectoral indices on the BSE were, Realty up by 1.88%,  Bankex up by 1.82%, Capital Goods up by 1.79%, Consumer Durables up by 1.19% and   Auto up by 1.14% while  Metal down by 0.40% and Oil & Gas down  by 0.03% there were  the only losers on the sectoral index.

The top gainers on the Sensex were Bharti Airtel up by 2.82%, ICICI Bank up by 2.79%, L&T up by 2.65%, Tata Motors up by 2.39% and Tata Power up by 1.96%. On the flip side, Coal India was down by 1.53%, Hindalco was down by 1.27%, Tata Steel was down by 0.82% , Gail India was down by 0.40% and Cipla was down by 0.31%  were the top losers on the Sensex.

Meanwhile, amid rising concerns over the widening fiscal deficit of the country, Finance Minister P Chidambaram said that India will have to rein in spending and cut subsidies to meet its fiscal deficit target at 4.8 percent of GDP in the current financial year. Highlighting more measures in the next few weeks and months to cut subsidies by the government and by the central bank (RBI), Finance Minister said that country's slowdown would impact companies’ revenues, therefore the government can reduce spending soon by some large government departments to contain fiscal deficit despite looming national election.

Chidambaram, who is trying to boost investors’ confidence by reducing a wide fiscal deficit, said that the government should tackle higher fuel and food subsidies sooner rather than later. India imports nearly 80 per cent of its oil needs and a sharp depreciation in domestic currency has made government fuel subsidies more costly. At present, oil subsidy is estimated at over Rs 90,000 crore for the current fiscal year, which is around 40 percent more than budgeted.    

Recently, in order to cut government spending in non-critical areas, the government has announced a slew of austerity measures including banning government departments for holding meetings in 5-star hotels among others. Meanwhile, in the previous fiscal, the government was able to contain the fiscal deficit at 4.9 percent of GDP in FY13, against the budgeted target of 5.1 percent of GDP.  The CNX Nifty is currently trading at 5,955.35 up by 49.20 points or 0.83% after trading in a range of 5,981.70 and 5,948.70. There were 36 stocks advancing against 14 declines on the index.

The top gainers of the Nifty were Indusind Bank up by 3.42%, DLF up by 2.79%, ICICI Bank up by 2.78%, Bharti Airtel up by 2.71% and L&T up by 2.67% .On the flip side, Coal India down by 1.17%, Hindalco down by 1.11%, GAIL down by 0.67%, Lupin down by 0.63% and BPCL down by 0.57% were the major losers on the index.

Most of the Asian equity indices were trading in green; Hang Seng rose 222.96 points or 0.97% to 23,196.91, Jakarta Composite surged 46.83 points or 1.07% to 4,421.79, Nikkei 225 strengthened 38.69 points or 0.28% to 13,892.01, Straits Times added 12.76 points or 0.41% to 3,149.35, Seoul Composite was up by 2.09 points or 0.10% to 1,997.31 and Taiwan Weighted was up by 30.11 points or 0.36% to 8,363.77. On the flip side, KLSE Composite dipped 1.60 points or 0.09% to 1,775.22.