Post Session: Quick Review

Dalal Street witnessed a relief rally at on Tuesday, wherein benchmark equity indices after reversing gears post RBI’s second quarterly monetary policy review, ended at highest closing level in 2013. Investors’ were heartened after India’s Apex bank, on much expected lines, hiked policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.5% to 7.75% with immediate effect, while further unwinding liquidity tightening measures, rolled back MSF rate by 25 bps. Nevertheless, the banking shares, emerging as the top performer of the session took the markets higher after RBI increased liquidity provided through term repos of 7-day and 14-day tenor from 0.25% of bank deposits to 0.5% with immediate effect. Meanwhile, mostly positive global cues also added to market’s glee, which by the end of the trade puffed over percentage and half to shut shop above the psychological 20,900 and 6,200 levels respectively. The broader indices also ended with modest gains of over one percent (Midcap index) and half a percent (Smallcap index).

On the global front, Asian pacific shares ended mixed on Tuesday, as investors waited for commentary from the US Federal Reserve after this week's policy meeting, where it is widely expected to keep policy on hold. Meanwhile, Monday's US economic data offered nothing to alter this view. US manufacturing output barely rose in September and contracts to buy previously owned homes fell the most in nearly 3-1/2 years, showing economic activity was on a weak footing even before the 16-day partial shutdown of the U.S. government, which is expected to trim fourth quarter growth. On the flip side, European shares edged higher early on Tuesday to keep within their recent, tight range as the banking sector slid after provisions for legal costs marred results at Deutsche Bank and UBS. Shares in UBS and Deutsche Bank fell by 6% and 2.6% after both banks, hit by allegations over a scam to manipulate inter-bank lending rates, said they were holding more capital to deal with legal costs.

The secular move of the markets was on account of across the board buying at the bourses, which took the entire 13 sectoral indices in green. On the sectoral front, while banking shares led the race, other rate sensitive Realty and Auto counters followed the suit. Absence of any negative surprise in policy review mainly lifted rate-sensitive counters, which otherwise were cautious on RBI’s hawkish tone in its Macroeconomic report a day before policy meet. RBI, in its report a day before upped its inflation forecast for FY14 to 6%, while lowering its FY15 growth forecast to 5.8% from 6.5% earlier. Additionally, Auto stocks also were in top gear, mianly driven by stellar Q2 performance of Maruti Suzuki. The company’s stocks rallied over 8% after Maruti reported 3 fold jump in Q2 net profit at Rs 670.23 crore for the quarter as compared to Rs 227.45 crore for the same quarter in the previous year.The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1297: 1096, while 164 scrips remained unchanged. (Provisional)

The BSE Sensex gained 352.42 points or 1.71% to settle at 20922.70.The index touched a high and a low of 20952.55 and 20493.66 respectively. Among the 30-share Sensex, 27 stocks gained, while 3 stocks declined. (Provisional)

The BSE Mid cap and Small cap indices ended higher by 1.53% and 0.56% respectively. (Provisional)

On the BSE Sectoral front, Bankex up by 4.48%, Realty up by 2.66%, Auto up by 2.46%, Metal up by 2.23% and Power up by 1.92% were the top gainers, while there were no losers. (Provisional)

The top gainers on the Sensex were Maruti Suzuki up by 8.85%,  ICICI Bank up by 6.35%, Tata Steel up by 4.67%, SBI up by 3.86% and Mahindra & Mahindra up by 3.85%, while, Bharti Airtel down by 0.46%, ITC down by 0.23% and BHEL down by 0.07% were the only losers in the index. (Provisional)

Meanwhile, extending its battle against inflation, Reserve Bank of India (RBI), in its second quarter monetary policy review 2013-14, yet again hiked policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.5% to 7.75% with immediate effect. Consequently, the reverse repo rate under the LAF stood adjusted to 6.75% and the Bank Rate reduced to 8.75% with immediate effect.

At the same time, India’s Apex bank, further unwinding liquidity tightening measures implemented this summer as it struggled to shore up the tumbling rupee, rolled back MSF rate by 25 bps to 8.75% and thus restoring normalcy left Cash Reserve Ratio (CRR) unchanged at 4%. The RBI, however, increased the liquidity provided through term repos of 7-day and 14-day tenor from 0.25% of bank deposits to 0.5% with immediate effect.

Further, striking a hawkish tone, an RBI study of professional forecasters estimated the average WPI inflation to climb up to 6% and stay about those levels for the remaining part of the year, while on the growth front, it reduced the projection for the current fiscal to 4.8% from 5.7% earlier. 

On Current Account Deficit (CAD), which was one of the primary reasons for the depreciating rupee, the RBI's recent trade data suggested it will improve in the second quarter and would come to 3.5%. Meanwhile, for the first time in history, Reserve Bank of India also set its forecast for retail Inflation. It said, 'Notwithstanding the expected edging down of food inflation, retail inflation is likely to remain around or above 9% in the months ahead, absent policy action.'

Thus, with higher estimation of inflation numbers and the cautious outlook put forward by the central bank, expectations of another repo rate hike of 25 basis points have now been reinforced.India VIX, a gauge for markets short term expectation of volatility lost 7.18% at 19.76 from its previous close of 21.29 on Thursday. (Provisional)

The CNX Nifty gained 119.80 points or 1.96% to settle at 6,220.90. The index touched high and low of 6,228.05 and 6,079.20 respectively. Out of the 50 stocks on the Nifty, 47 ended in the green, while 3 ended in the red.

The major gainers of the Nifty were Maruti Suzuki up 8.75%, JP Associate up by 7.76%, ICICI Bank up by 6.26%, IndusInd Bank up by 5.63% and Axis Bank up by 5.16%, while Ranbaxy down by 0.90%, ITC down by 0.29% and Bharti Airtel down by 0.13% were the only losers in the index (Provisional)

The European markets were trading in green with, France’s CAC 40 up by 0.19%, Germany’s DAX up by 0.07% and the United Kingdom’s FTSE 100 up by 0.36%.

The Asian markets concluded Tuesday’s trade on a mixed note as investors digested a slew of corporate earnings, while sentiment turned cautious ahead of Wednesday’s Federal Reserve policy decision. Japanese retail sales for September rose 3.1% from a year earlier, with the result beating a consensus forecast for a 1.9% rise. The sales at large retailers were up 0.7% from a year earlier. Japanese household spending rose sharply in September, beating expectations, while the unemployment rate ticked slightly lower. Spending by households of two or more people rose a price-adjusted 3.7% from a year earlier, marking the best result in six months. The unemployment rate, meanwhile, slipped to 4.0% from 4.1% in August, though still above the year’s low of 3.8%, hit in July.

Shanghai’s new home market extended its strength for another week as buyers and real estate developers continued to be bullish, which saw more than 357,000 square meters of houses sold last week. The sales of new homes, excluding government-funded affordable housing, rose 8 percent from the previous week to 357,700 square meters during the seven-day period. South Korea’s current account surplus expanded in September from the previous month on trade gains and stronger service industry earnings. The current account, the broadest measure of trade with the rest of the world, showed a surplus of 6.57 billion dollars in September, up from a revised $5.68 billion in August.