RBI’s status quo stance lift markets higher; Nifty recaptures 6,200 mark

`Snapping six-day losing streak, Indian equity benchmarks finally got sigh of relief with frontline gauges gaining over a percentage point. There was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too equally participated in the rally. Both the benchmarks scaled past to the psychological level of 6,200 (Nifty) and 20,850 (Sensex) after the Reserve Bank of India (RBI), in its December mid-quarter monetary policy review surprisingly, maintained a status quo stance on its key policy rates as it left the policy repo and reverse repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75% and 6.75% respectively. Further, RBI kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL). Additionally, marginal standing facility (MSF) rate and the Bank Rate too stood unchanged at 8.75%.

Positive opening in European markets too aided sentiments with CAC, DAX and FTSE all trading significantly higher in early deals ahead of the conclusion of the US Federal Reserve’s last policy meeting for the year while, Asian markets ended mixed with Japanese markets garnering gain over a percent, as the country saw a merchandise trade deficit of 1.292 trillion yen in November, beating forecasts for a shortfall of 1.351 trillion yen.

Back home, some support came in from the Reserve Bank’s statement that it expects economic growth to improve in the second half of this financial year on the back of expansion in the agriculture sector, exports and movement in stalled projects. Some boost also came in from reports that foreign institutional investors (FIIs) bought shares worth a net Rs 249.93 crore on December 17, 2013, as per provisional data from the stock exchanges. Appreciation in Indian rupee too supported the sentiments. The partially convertible rupee was trading at 61.97 per dollar at the time of equity market closing against the yesterday’s close of 62.01 on the Interbank Foreign Exchange.

Meanwhile, interest rate sensitive counters like auto, bank and realty stocks edged higher after the RBI kept its main lending rate viz. the repo rate unchanged. Fertilizer stocks such as Rashtriya Chemical fertilizer, Coromandel International and National Fertiliser too remained on buyers’ radar after finance ministry granted Rs 10,000 crore under a special banking arrangement (SBA) as sought by the department of fertilizer to help the industry tide over the liquidity crunch. Additionally, retail stocks edged higher after Tesco Plc applied to buy a 50 percent stake in Trent Hypermarket, a unit of Tata Group’s Trent.

The NSE’s 50-share broadly followed index Nifty rose by around eighty points to surpass its psychological 6,200 level, while Bombay Stock Exchange’s sensitive Index -- Sensex surged by around two hundred and fifty points to end above the psychological 20,850 mark.

Broader markets too traded with traction and ended the session in the green with a gain of around one and half a percent. Moreover, the market breadth remained in favour of advances, as there were 1,497 shares on the gaining side against 951 shares on the losing side, while 177 shares remained unchanged.

Finally, the BSE Sensex surged by 247.72 points or 1.20%, to settle at 20859.86, while the CNX Nifty gained 78.10 points or 1.27% to settle at 6,217.15.

The BSE Sensex touched a high and a low of 20917.57 and 20568.70, respectively. The BSE Mid cap index was up by 1.35%, while the Small cap index gained 1.13%.

The top gainers on the Sensex were BHEL up 5.70%, Tata Power up 4.04%, Bajaj Auto up 3.87%, Hero MotoCorp up 3.14%, and L&T up 2.83%, on the flip side Jindal Steel down 1.55%, SSLT down 0.74%, and ICICI Bank down 0.13%, were the only losers on the index.

On the BSE Sectoral front, Realty up by 3.51%, Capital Goods up by 2.61%, Oil & Gas up by 2.15%, Power up by 2.09%, and PSU up by 1.87%, were the top gainers. While, there were no losers on the sectoral front.

Meanwhile, in order to enhance competitiveness of the Micro, Small and Medium Enterprises (MSMEs), the National Board for MSMEs has discussed various aspects of MSME sector with special focus on the Public Procurement Policy. The board in its official statement appealed to all the members to mobilize MSME Associations and units to actively participate in the Procurement process at the government level to facilitate a demand pull growth in the segment.

The MSMEs board meeting chaired by Minister of State for MSME K H Muniyappa has also announced new developments in the MSME sector, which include creation of India Inclusive Innovation Fund, legal framework for factoring services and creation of 15 new technology centres.

Presently, every ministry except for defence is required to procure a minimum of 20% of annual value of goods and services from micro and small enterprises’. However many ministries are yet to come up with a procurement plan. The need to review Public Procurement Policy has emerged, as the share of MSMEs in the GDP, manufacturing output and exports has been slowly declining. Furthermore, owing to the nature of the structure of the MSMEs, they have far less ability to counter demands of time and resources as efficiently as their larger counterparts. The move is also aimed to counter the imports of electronic system and design management sector.

The CNX Nifty touched a high and low of 6,236.00 and 6,129.95 respectively.

The top gainers on the Nifty were BHEL up by 6.32%, DLF up by 5.63%, PNB up by 4.74%, IndusInd Bank up by 4.29%, and Bajaj Autoup by 4.08%, On the other hand, Jindal Steel & Powe down by 0.87%, SSLT down by 0.57%, and UltraTech Cement down by 0.27%, were the only losers.

The European markets were trading in green, France's CAC 40 was up by 0.69%, Germany's DAX was up by 0.93%, and United Kingdom's FTSE 100 was up by 0.35%.

The Asian markets concluded Wednesday’s trade on a mixed note with Japan’s stocks led Asian markets higher ahead of the conclusion of the US Federal Reserve’s policy meeting. Indonesia’s central bank plans to introduce a one-year currency swap next week as part of broader efforts to deepen the market. Japanese business confidence has soared to a six-year high, the country’s central bank stated, underscoring growing optimism among major companies despite a slowdown in the world’s third-largest economy. The Bank of Japan’s quarterly Tankan survey, which polled more than 10,500 firms, surged to its strongest level since December 2007, with a reading for large manufacturers rising to plus 16 from plus 12 in September. Japanese exports rose 18.4% from a year earlier in November, overshooting expectations for a 17.3% rise. That marked the ninth consecutive month of increase, as manufacturers benefited from a weaker yen brought about by Prime Minister Shinzo Abe’s pro-growth strategies. A recovery in exports is important for the country’s economy ahead of a planned sales-tax increase in April.

China attracted $8.5 billion in foreign direct investment in November--up 2.35% on year, the Ministry of Commerce stated. The figure was more than October’s $8.42 billion which was up 1.24% on year. FDI in the January-November period rose 5.48% on year to $105.5 billion. Non-financial overseas direct investment rose 28.3% on year in the January-November period to $80.2 billion. Besides, the price of homes in big cities continued to rise from a year earlier in November, despite Beijing’s efforts to cool the market. New home prices increased month on month in 66 of the 70 major cities monitored by the government last month, up from 65 in October.