Post session - Quick review

Centeral bank’s move of leaving interest rate unchanged at its mid-quarterly policy review threw equity markets in dilemma, besides mincing the barometer indices drastically below their crucial psychological level. The rally which was witnessed at the start of the trade fizzled out by the end of it, leaving the barometer gauges gasping. The widely followed 50 share index, tumbling to a 25 month low ended sub 4700 psychological level. Similarly, 30 share index of Bombay Stock Exchange (BSE)-Sensex-too slipped over 1 year low to end at sub 15,500 mark.

Contradictory with the global indices, Indian equity indices staged a dismal show for third straight session in a row as rattled investors continued exiting out of riskier assets after RBI besides, leaving CRR and Repo rates unchanged , said that downside risk for the growth of the economy has clearly increased. Wave of disenchantment ran across the markets after RBI refrained to announce any measures to improve market liquidity.

Meanwhile, on the global front, Asian pacific markets picking leads from optimistic trade of Wall Street overnight, ended on a positive note. Strong US economic data amidst successful Spanish bond auction aided relief-buying after a string of recent losses at Asian equity markets. Additionally, European shares which rose in early trade also failed to provide any impetus to the ailing equity markets.

Back home, market participants in the noon deals did heave the markets higher on optimism of reversal of RBI’s stance going further, however, that proved rather short-lived. Reiterating its second quarter review guidance, RBI stated that, “based on the projected inflation trajectory, further rate hikes might not be warranted”. However, hawkish comments from RBI’s governor- Duvvuri Subbarao- rubbed off the optimism. Duvvuri said, “Reserve Bank of India cannot speculate on when it will cut interest rates.” Although selling was witnessed across the board on the BSE sectoral front, stocks from Capital Goods (CG), Realty, Bankex, Power and Metal counters featuring the list of worst performers, could be held responsible for dreary performance of 30 share index-Sensex- which offloading over 300 points ended at sub 15,500 mark.

However, butchery was also witnessed across the broader space, as both midcap and smallcap indices plunging below 1.50% ended abysmally lower.

The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 856:1891 while 116 scrips remained unchanged.

The BSE Sensex lost 344.68 points or 2.18% and settled at 15,491.79. The index touched a high and a low of 16,068.90 and 15,425.20 respectively. 3 stocks advanced against 26 declining ones while 1 stock remain unchanged on the index (Provisional)

The BSE Mid-cap index lost 1.74% while Small-cap index was down by 1.66%. (Provisional)

On the BSE Sectoral front, there were no gainers while Capital Goods down 4.51%, Realty down 3.53%, Bankex down 3.21%, Power down 3.10% and Metal down 2.64% were the top losers.

The top gainers on the Sensex were Maruti up 0.75%, Bajaj Auto up 0.25% and Cipla up 0.17%.

On the flip side, L&T down 5.79%, JP Associates down 4.31%, Sterlite down 4.18%, SBI down 4.10% and BHEL down 4.06% were the top losers on the index. (Provisional)

Meanwhile, the Reserve Bank of India (RBI), for the first time since March 2010, kept the key policy rates unchanged. In the mid-quarter monetary policy review, the RBI kept its repo rate, the rate at which RBI lends funds to banks constant at 8.5% and reverse repo rate, at which the RBI borrows money from banks at 7.5%. The RBI also left the cash reserve ratio (CRR), which is the amount of cash the banks have to maintain with the central bank, unchanged at 6%, despite market speculation that it might cut the ratio in order to bolster market liquidity. Bank rate was also maintained at 6%.

The RBI in its mid-quarter monetary policy review, said, ‘on the domestic front, growth is clearly decelerating. This reflects the combined impact of several factors; the uncertain global environment, the cumulative impact of past monetary policy tightening and domestic policy uncertainties.’

‘Both inflation and inflation expectations are currently above the comfort level of the Reserve Bank. However, reassuringly, inflationary pressures are expected to abate in the coming months despite high crude oil prices and rupee depreciation. The growth deceleration is contributing to a decline in inflation momentum, which is also being helped by softening food inflation’ the RBI added.

Finance Minister Pranab Mukherjee on December 15, said that the government's focus needs to shift back to growth concerns in view of weakening growth and market sentiments. 'The present indicators show that both private consumption and investment sentiments have weakened and it is this weakening of sentiments that makes it necessary to shift some of our focus back to near term issues.’

On the domestic front, agricultural prospects look promising on the back of expected record kharif output and satisfactory progress on rabi sowing. However, industrial activity is moderating, driven by deceleration in investment, which is a matter of serious concern, the RBI said.

However, by adding further it said that overall, the growth momentum in the economy is clearly moderating. Further, considering the global and domestic macroeconomic situation, the downside risks to the Reserve Bank’s growth projection, as set out in the Second Quarter Review (SQR), have increased significantly.

India VIX, a gauge for market’s short term expectation of volatility gained 3.05% at 29.69 from its previous close of 28.81 on Thursday. (Provisional)

The S&P CNX Nifty lost 100.00 points or 2.11% to settle at 4,646.35. The index touched high and low of 4,818.85 and 4,628.20 respectively. 10 stocks advanced against 40 declining ones on the index. (Provisional)

The top gainers on the Nifty were Gail up 4.06%, HCL Tech up 1.27%, Dr. Reddy’s Lab up 1.25%, Grasim up 0.83% and BPCL up 0.63%. 

On the other hand, L&T down 6.20%, PNB down 5.59%, Axis Bank down 5.17%, JP Associates down 4.80% and Sterlite down 4.66% were the top losers. (Provisional)

The European markets are trading on a mix note, with France's CAC 40 down 0.15%, Germany's DAX up 0.06% and FTSE 100 up 0.44%.

Asian stocks rose on Friday amid improving US jobs and manufacturing data and the expected approval in Italy of an austerity plan intended to get the country’s finances under control. Later today, the Italian government will hold a critical confidence vote in the lower house of parliament on a multibillion euro austerity package. Despite widespread opposition, the plan aimed at persuading bond markets that the country can emerge from the widening European debt crisis is expected to pass. Traders were also encouraged by a report from the Federal Reserve of New York that its index measuring regional manufacturing jumped to the highest level since May.

Chinese main stock index closed up 2 percent on Friday, supported by speculation that some sort of stock-boosting measures could be announced. Seoul shares rose over a percent, buoyed by signs of strength in the US economy and a solid bounce in battered automakers, but gains were limited by institutional selling that continued for a second consecutive session.