Benchmarks trade higher ahead of RBI policy announcement

The Indian equity markets have extended its gains after a flat start following sharp appreciation in the rupee. Even globally, the US economic data and Spanish bond auction improved sentiments. The US markets ended modestly higher overnight, halting a three-day slide while, all the Asian equity indices were trading in the green at this point of time. Back home, at the moment, all eyes are on the RBI’s mid-quarter review of monetary policy expected today in noon. On the sectoral front, Auto remained the top gainer followed by power and realty while, software and technology remained the only losers on the index. Meanwhile, PSU oil marketing companies viz. BPCL, HPCL and IOC were trading with a gain of 1-3 percent as crude oil prices extended their declining streak on Thursday as they plunged over a percent amid growing concerns over the prospects of global oil demand. The broader indices were performing in line with benchmarks. The market breadth on the BSE was positive; there were 1,045 shares on the gaining side against 402 shares on the losing side while 45 shares remained unchanged.

The BSE Sensex opened at 15,868.78; about 32 points higher compared to its previous closing of 15,836.47, and has touched a high and a low of 16,001.76 and 15,866.63 respectively.

The index is currently trading at 15,983.21, up by 146.74 points or 0.93%. There were 26 stocks advancing against just 4 declines on the index.

The overall market breadth has made a strong start with 70.04% stocks advancing against 26.94% declines. The broader indices were going neck to neck with benchmarks; the BSE Mid cap and Small cap indices surged 0.85% and 0.76% respectively.

The top gaining sectoral indices on the BSE were, Auto up by 1.57%, Power up by 1.52%, Realty up by 1.49%, Bankex up by 1.45% and CD was up by 1.38%. While, IT down by 0.90% and TECk down by 0.14% remained the only losers on the index.

The top gainers on the Sensex were Bharti Airtel up by 3.77%, Tata Power up by 2.99%, Hindalco up by 2.40%, Tata Motors up by 2.40% and M&M up by 2.06%.

On the flip side, Wipro was down by 1.78%, TCS was down by 1.32%, Coal India was down by 0.63% and Infosys was down by 0.46% were the top losers on the Sensex.

Meanwhile, worried over the current economic environment, Finance Minister Pranab Mukherjee stressed on the need of new policy initiatives to revive slowing growth and control inflation as fiscal and monetary options are increasingly limited.

The policymakers are under pressure as the traditional policy tools of fiscal and monetary policies has failed to deal with the ongoing slowdown in economic activities. As per the latest official data, India’s economic growth in second quarter in 2011-12, stood at 6.9% compared to 7.7% in the first quarter 2011-12, as a result India’s economic growth in the first half of current financial year stood at 7.3%. The economic growth is the coming month is also expected to decline as the Index of Industrial Production (IIP) declines from last few months.

The IIP in October stood at -5.1% as compared to 2% in September 2011. And in first seven months India’s industrial production stood at 3.5% from 8.7% achieved in April-October 2010. Along with the decline in industrial production, Indian rupee also registered record decline, and touched all time low level of around Rs 54 per American dollar.

Pranab Mukherjee said, 'Options for fiscal steps as well as monetary measures are increasingly limited. However, there is potential for policymaking in other areas. Sharp increases in interest rates were hurting growth and India needed practical solutions to address its economic slowdown, such as building political consensus to open up sectors to foreign investment, he added.

The government, earlier this month, was forced to hold its plans to open India’s $450 billion multi-brand retail for Foreign Direct Investment. The government had faced stiff opposition from opposition parties. 

However, the Reserve Bank of India (RBI), which has increased its repo and reverse repo rates for 13 times since March 2010, is expected to take pause at its scheduled monetary policy review on December 16, after the sharp decline in industrial production and moderation in headline inflation. The headline inflation measured by wholesale price index (WPI) stood at 9.11% in November compared to 9.73% in October. The RBI expects inflation to moderate to 7% by the end of the current fiscal year. However, finance minister quoted that the headline inflation at 9.11% is unacceptable. 

The S&P CNX Nifty opened at 4,752.50; about 6 points higher compared to its previous closing of 4,746.35, and has touched a high and a low of 4,815.75 and 4,752.50 respectively.

The index is currently trading at 4,791.90, higher by 45.55 points or 0.96%. There were 45 stocks advancing against just 5 declines on the index.

The top gainers of the Nifty were Bharti Airtel up by 3.68%, Tata Power up by 2.98%, Hindalco up by 2.28%, Reliance Power up by 2.18% and M&M up by 2.16%.

On the flip side, Wipro down by 2.21%, TCS down by 1.62%, Coal India down by 0.82%, HCL Tech down by 0.62% and Infosys down by 0.46%, were the major losers on the index.

All the Asian equity indices were trading in the green; Shanghai Composite was up 0.32 points or 0.01% to 2,181.22, Hang Seng was up 109.39 points or 0.61% to 18,136.23, Jakarta Composite was up 54.30 points or 1.47% to 3,755.84, Nikkei 225 was up 42.30 points or 0.50% to 8,419.67, Straits Times was up 11.88 points or 0.45% to 2,647.13, Seoul Composite was up 14.56 points or 0.80% to 1,833.67 and Taiwan Weighted was up by 31.33 points or 0.46% to 6,795.92.