Benchmarks lose ground after bit of recovery; Sensex trades above 20,650 level

After plunging to a knee jerk reaction on RBI’s decision of hiking rates and subsequent retreat, Indian equity markets now have enlarged their losses on sustained selling pressure. Trade at Dalal Street took a turn for the worse after Reserve Bank of India, in its third Quarter Review of Monetary Policy Statement 2013-14, much against the street’s expectation went ahead and hiked key repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 8.0% from 7.75%. Reacting most to this development, banking stocks collapsed like house of cards, dragging the entire markets lower. However, off day’s high, Sensex and Nifty, were trading above the crucial 20,650 and 6,100 levels respectively, albeit with loss of over quarter of a percent. Meanwhile, broader indices also succumbing to selling pressure were showing mixed trend at this point of time.

On the global front, Asian stocks stabilized on Tuesday, with many markets trading around the break-even mark, as the region paused after a global selloff that saw heavy losses in recent sessions.

Closer home, while banking stocks were one of major losers on the index, stocks from Information Technology and Healthcare counters also witnessed beating. On the flip side, stocks from Metal, Auto and Realty counters holding in green were restricting further losses of markets. The overall market breadth on BSE was evenly distributed, with total of 1044 stocks on declining side against 1045 shares on the advancing and 162 shares remaining unchanged. The BSE Sensex is currently trading at 20656.51, down by 50.94 points or 0.25% after trading in a range of 20795.35 and 20554.28. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices continued trading mixed; while BSE Mid cap index was down by 0.07%, Small cap index was trading up by 0.24%.

The gaining sectoral indices on the BSE were Metal up by 1.07%, Auto up by 0.73%, Realty up by 0.62, Oil & Gas up by 0.55% and Consumer Durables up by 0.73%. While, Teck down by 0.98%, IT down by 0.95%, Bankex down by 0.82%, Healthcare down by 0.77% and FMCG down by 0.37% were the losing indices on BSE.   

The top gainers on the Sensex were Tata Steel up by 2.59%, Tata Motors up by 1.61%, Bajaj Auto up by 1.22%, RIL up by 1.09% and SSLT up by 0.97%. On the flip side, Axis Bank down by 2.50%, Hindustan Unilever down by 2.11%, Sun Pharma down by 1.96%, Cipla down by 1.57% and Infosys down by 1.45%.

Meanwhile, carrying out a quite shift from Wholesale price index (WPI) to new Consumer price index (CPI) for anchoring monetary policy, Reserve Bank of India (RBI), shocking the markets increased the repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 8.0% from 7.75%. With this, the reverse repo rate under the marginal standing facility (MSF) and the Bank Rate stand higher at 7.0% and 9.0% respectively. However, Cash Reserve Ratio (CRR) was left unchanged at 4.0% of net demand and time liability (NDTL).

Consistent with its December guidance of waiting for more data before acting, RBI much against street’s expectation of holding key policy rates unchanged,  went on to hike rates after CPI inflation, excluding food and fuel, remained flat and WPI inflation excluding food and fuel rose. RBI, in its assessment highlighted that while retail inflation measured by the consumer price index (CPI) declined significantly on account of the anticipated disinflation in vegetable and fruit prices, it remained elevated at close to double digits. Moreover, it pointed that inflation excluding food and fuel too was high, especially in respect of services, indicative of wage pressures and other second round effects.

On the growth front, RBI in its policy document stated that if policy actions succeeded in delivering the desired inflation outcome, real GDP growth could firm up from a little below 5% in 2013-14 to a range of 5 to 6% in 2014-15, with risks balanced around the central estimate of 5.5%.

Further, on Urjit Patel Committee’s recommendation, RBI’s in its policy stand and rationale indicated this as “glide path” for disinflation that sets an objective of below 8% CPI inflation by January 2015 and below 6% CPI inflation by January 2016.

However in a bit of positive, RBI on future trajectory of rates, underscored that the extent and direction of further policy steps would be data dependent, though if the disinflationary process evolves according to the baseline projection and that the further policy tightening in the near term was not predictable at this juncture.

RBI governor Raghuram Rajan ever after taking over the reins at Mint Street in September has raised rates and continued the fight against inflation, it is only in December  that he left rates unchanged, considering the weak state of the economy and the wide bands of uncertainty surrounding the short term path of inflation.

The CNX Nifty is currently trading at 6,118.60, down by 17.25 points or 0.28% after trading in a range of 6,163.60 and 6,085.95. There were 21 stocks advancing against 29 declining on the index.

The top gainers of the Nifty were Tata Steel up by 2.91%, Ranbaxy up by 2.36%, Tata Motors up by 1.54%, Bajaj Auto up by 1.16% and Reliance up by 1.09%. On the flip side, Lupin down by 2.72% Axis Bank down by 2.36%, Indusind Bank down by 2.30%, Hindustan Unilever down by 2.07% and Sun Pharma down by 1.99% were the major losers on the index.

The Asian equity indices were trading mixed; Seoul Composite up by 0.34%, Hang Seng up by 0.01%, KLSE Composite up by 0.15%, Straits Times up by 0.25%, Jakarta Composite up by 0.17%. While, Shanghai Composite down by 0.30% and Nikkei 225 down by 0.17% were the only losers among Asian pack.