Benchmarks trade cautiously ahead of RBI’s policy announcement

Indian equity benchmarks are trading slightly lower in early deals on Tuesday as investors remained on sidelines ahead of Reserve Bank of India’s (RBI’s) monetary policy announcement later in the day. The street is expecting RBI to raise its repo rate by 25 basis points (bps) and cut marginal standing facility (MSF) by 25 bps. Global cues too remained sluggish with the US markets closing modestly lower overnight as traders seemed reluctant to make any significant moves following the strong gains in last few weeks, ahead of the Federal Reserve's Wednesday announcement on monetary policy. All the Asian equity benchmarks were trading in the negative terrain in early deals on Tuesday as investors remained on sidelines awaiting the outcome of the US Federal Reserve’s policy meeting this week.

Back home, the market is expected to remain volatile, as traders will roll over positions in the futures & options (F&O) segment from the near month to November series on October 31, 2013. However, buying in oil and gas counter capped downside for the markets. Stocks of public sector oil marketing companies (OMCs) viz. BPCL, HPCL and IOC edged higher as the Kirit S. Parikh Committee’s report on pricing diesel, domestic LPG, and PDS kerosene is likely to suggest an immediate increase in diesel prices by at least Rs 4 a litre and, thereafter, doubling the current pace of increase in diesel prices to Re1 per month. Apart from this, there will be lot of result reactions to keep the markets ticking.

On the sectoral front, consumer durables witnessed the maximum gain in trade followed by oil and gas and healthcare, while capital goods, realty and bankex remained the top losers on the BSE sectoral space. The broader indices too were struggling to get some traction, while the market breadth on the BSE was negative; there were 472 shares on the gaining side against 710 shares on the losing side while 44 shares remain unchanged.

The BSE Sensex opened at 20593.49; about 23 points higher compared to its previous closing of 20570.28, and has touched a high and a low of 20606.68 and 20531.28 respectively. The index is currently trading at 20552.55, down by 17.73 points or 0.09%. There were 12 stocks advancing against 18 declines on the index.

The overall market breadth has made a weak start with 38.50% stocks advancing against 57.91% declines. The broader indices were trading in red; the BSE Mid cap down by 0.25% and Small cap indices down by 0.31%. 

The top gaining sectoral indices on the BSE were, Consumer Durables up by 1.25%, Oil & Gas up by 0.54%, Health Care up by 0.43%, Auto up by 0.37% and IT up by 0.14%, while Capital Goods down by 1.63%, Realty down by 0.91%, Bankex down by 0.64% and Power down by 0.38% were the top losers on the sectoral index.

The top gainers on the Sensex were Maruti Suzuki up by 5.29%, ONGC up by 1.13%, Dr Reddys Lab up by 0.83%, SSLT up by 0.72% and Sun Pharma up by 0.70%. On the flip side, BHEL was down by 3.23%, L&T was down by 1.98%, SBI was down by 0.89%, HDFC Bank was down by 0.64% and Bajaj Auto was down by 0.63% were the top losers on the Sensex.

Meanwhile, in order to meet India’s growing coal demand, the government will soon invite bids from private players to kickstart coal mining in a public-private partnership (PPP) mode in the country, which would also end the monopoly of public sector unit Coal India. The decision to invite bids was taken by a nine-member high-level committee, headed by coal secretary and having senior officials from the finance ministry, Planning Commission as well as the law ministry. According to the proposal, the coal mines will remain in the ownership of the public sector while the private partner will receive a mining charge on the coal mines. Further, sale of such coal will be undertaken by the public entity, which grants the PPP concession.

The move will also be helpful to check the widening current account deficit (CAD) of the country by reducing the coal imports. In spite of world's fifth largest in terms of reserves and third-largest producer of coal, India's domestic output has failed to keep pace with demand over the past few years. At present, Indian domestic coal demand is around 35 percent higher than domestic supply, resulting into a high deficit of which a huge part is being met by costly imports from Indonesia, South Africa and Australia. In the previous fiscal, India imported $16 billion worth of coal. 

India is the world's third-largest producer of coal and the fifth largest in terms of reserves. Presently, Coal India is the only producer of domestic coal, which is struggling to meet domestic requirement. Thus, the government is of the view that involvement of private players will produce faster and cheaper coal for the country. Acute coal shortages in the country has become primary reason for power deficit in the country as coal-fired plants account for 57% of India's installed electricity capacity. 

The CNX Nifty opened at 6,107.55; about 6 points higher as compared to its previous closing of 6,101.10, and has touched a high and a low of 6,111.65 and 6,087.65 respectively. The index is currently trading at 6,094.35, down by 6.75 points or 0.11%. There were 23 stocks advancing against 27 declines on the index.

The top gainers of the Nifty were Maruti Suzuki up by 5.45%, Cairn up by 2.00%, BPCL up by 1.30%, ONGC up by 1.22% and HCL Tech up by 1.12%. On the flip side, BHEL down by 3.12%, IDFC down by 2.50%, L&T down by 1.94%, IndusInd Bank down by 1.65% and DLF down by 1.16% were the major losers on the index.

The Asian equity indices were trading in red; Shanghai Composite declined 22.74 points or 1.07% to 2,111.13, Hang Seng dipped 30.61 points or 0.13% to 22,775.97, Jakarta Composite shed 31.08 points or 0.68% to 4,559.46, KLSE Composite slipped 1.70 points or 0.09% to 1,816.69, Nikkei 225 dropped 141.65 points or 0.98% to 14,254.39, Straits Times decreased 2.63 points or 0.08% to 3,205.22, Seoul Composite contracted 4.05 points or 0.20% to 2,044.09 and Taiwan Weighted was down by 21.90 points or 0.26% to 8,385.93.