Benchmark pares losses as rate cut in line with expectations

Benchmarks pared the losses  in the late morning trades after Reserve Bank of India (RBI), in its second quarterly monetary policy review 2013-14, increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.5% to 7.75% with immediate effect. Consequently, with this reverse repo rate under the LAF stands adjusted to 6.75% and the Bank Rate stands reduced to 8.75% with immediate effect. With these changes, the MSF rate and the Bank Rate are recalibrated to 100 basis points above the repo rate. Further, the central bank reduced the Marginal Statutory Funding Rate by 25 bps to 8.75% with immediate effect. However, Cash Reserve Ratio (CRR) was left unchanged at 4%. 

On the global front, the most of 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, traders were buying, Consumer Durables, Health Care and Auto while selling were seen in Capital Goods, Realty and Bankex on the BSE. 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.  

The market breadth on BSE remains positive with advances to declines in the ratio of 967:702. BSE Sensex and NSE Nifty were comfortably trading near their psychological 20,500 and 6,000 levels respectively. The BSE Sensex is currently trading at 20523.91, down by 46.37 points or 0.23% after trading in a range of 20606.68 and 20513.95. 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 0.34% and Small cap index lost 0.42%.

The top gaining sectoral indices on the BSE were, Consumer Durables up by 0.98%, Healthcare up by 0.59%, Auto up by 0.48%,Oil & Gas up by 0.29%, and Metal up by 0.12%, while Capital Goods down by 1.96%, Realty down by 1.15%, Bankex down by 0.69% ,Power down by 0.60%  and FMCG down by 0.51% were the top losers on the sectoral index.

The top gainers on the Sensex were Maruti Suzuki up by 5.29%, Sun Pharma up by 1.43%, Dr Reddys Lab up by 0.99%, SSLT up by 0.77% and Hindustan Unilever up by 0.52%. On the flip side, BHEL was down by 3.23%, L&T was down by 2.41%, SBI was down by 1.26%, ITC was down by 1.11% and HDFC Bank was down by 1.08% were the top losers on the Sensex.

Meanwhile, the government has cleared 13 Foreign Direct Investment (FDI) proposals worth Rs 1,258 crore. Foreign investment is considered crucial for economic development of a country and the government has taken several policy decisions to attract foreign investments in various sectors including telecom, tea, pension and petroleum and natural gas.

Meanwhile, India would require around $1 trillion in the 12th five-year plan (2012-2017), to overhaul its infrastructure sector such as airports, ports and highways to boost growth. Further, a rise in FDI will help support the rupee, which depreciated over 15 percent against US dollar in 2013. Despite the government's various efforts to increase foreign investment, FDI during the April-August period of 2013-14 has grown by a marginal 4 percent to $8.46 billion, from $8.16 billion in the first five months of 2012-13, reflecting the need to take more measures to improve the business environment in the country.

Among the major proposals, which have been approved are Shantha Biotechnics (Rs 755 crore), Equitas Holdings (Rs 222.8 crore) and Stork Titanium (Rs 156 crore) among others. Referring to private sector lender Axis Bank’s FDI proposal, finance ministry said that the proposal of Axis Bank, amounting to Rs 6,265.76 crore has been recommended for consideration of the Cabinet Committee on Economic Affairs (CCEA) as the investment involved in the application is above Rs 1,200 crore. The private sector lender Axis Bank had sought the Foreign Investment Promotion Board (FIPB) nod to increase the foreign equity from the existing 49 per cent to 62 percent.

The CNX Nifty is currently trading at 6,087.25 down by 13.85 points or 0.23% after trading in a range of 6,111.65 and 6,082.45. There were 25 stocks advancing against 25 declines on the index.

The top gainers of the Nifty were Maruti Suzuki up by 5.55%, Cairn up by 2.03%, Sun Pharma up by 1.37%, BPCL up by 1.28%, and HCL Tech up by 1.27%. On the flip side, BHEL down by 3.19%, L&T down by 2.38%, IDFC down by 2.30%, IndusInd Bank down by 1.93% and DLF down by 1.57% 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 7.81 points or 0.03% to 22,798.77, Jakarta Composite shed 31.08 points or 0.68% to 4,559.46, KLSE Composite slipped 1.52 points or 0.08% to 1,816.87, Nikkei 225 dropped 47.27 points or 0.33% to 14,348.77,  Seoul Composite contracted 4.05 points or 0.20% to 2,044.09 and Taiwan Weighted was down by 6.22 points or 0.07% to 8,401.61.Straits Times decreased 0.99 points or 0.05% to 3,209.31.