Benchmarks languish in red on profit-booking; banking stocks sulk

After slipping into negative territory, benchmark equity indices continued to languish in red, with cut of over quarter of a percent, trading below the crucial 22,350 (Sensex) and 6,700 (Nifty) levels respectively. Bourses after rising a bit to a knee-jerk reaction after RBI’s first bi-monthly monetary policy 2014-15, wherein it left key policy repo rate unchanged, slipped into negative territory soon as lack of surprise in RBI’s annual monetary policy and moreover a bit of cautious policy stance made investors revaluate their portfolio, with some also using this opportunity to book profits, especially in banking stocks that were one of the top loser of the session. Although, RBI highlighted that it was appropriate in holding the policy rates at this juncture, while allowing the rate increases undertaken during September 2013-January 2014 to work their way through the economy, they would firmly focus on keeping the economy on a disinflationary glide path that is intended to hit 8 per cent CPI inflation by January 2015 and 6 per cent by January 2016. Worryingly, it added that lead indicators do not point to any sustained revival in industry and services as yet, and the outlook for the agricultural sector was contingent upon the timely arrival and spread of the monsoon.

However, broader indices indecisive about their trajectory were trading mixed at this point of time, with Smallcap index substantially outperforming larger peers and trading with gains of close to two tenth of a percent.On the global front, Asian shares hit a four-month high on Tuesday after dovish comments from Federal Reserve Chair Janet Yellen and China's official PMI survey showing the manufacturing sector managed to continue expanding in March.

Closer home, sentiment also soured to some extent after conditions in India’s manufacturing sector signaled a slight and weaker improvement in March, according to the HSBC India Manufacturing Purchasing Managers’ Index as output and new orders increased at weaker rates.On the BSE sectoral front, stocks from IT, TECK Oil & Gas were the top gainers of the session, while those from Realty, Banking and Capital Goods counters were the major pockets of weakness. In non-sectoral guage, Fertilizer stocks, viz, RCF, Chambal fertilizer stocks were trading strong after election Commission (EC) approved to hike urea fixed price by Rs 350/ million tonne (mt). The overall market breadth on BSE is in the favour of declines which have thumped advances in the ratio of 1047:780; while 23 shares remained unchanged.

The BSE Sensex is currently trading at 22308.48, down by 77.79 points or 0.35% after trading in a range of 22485.77 and 22301.67. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.35%, while Small cap index up by 0.20%.

The gaining sectoral indices on the BSE were IT up by 1.28%, TECK up by 0.93%, Oil & Gas up by 0.54%, Consumer Durables up by 0.49%, Healthcare up by 0.45%. While, Realty down by 1.70%, Bankex down by 1.54%, Capital Goods down by 1.22% and FMCG down by 0.72% were the losing indices on BSE.   

The top gainers on the Sensex were TCS up by 2.14%, Wipro up by 1.73%, ONGC up by 1.68%, NTPC up by 1.08% and SSLT up by 1.01%. On the flip side, Hindalco Inds down by 3.07%, SBI down by 1.79%, Maruti Suzuki down by 1.61%, HDFC Bank down by 1.52% and Bharti Airtel down by 1.47%.

Meanwhile, in the first bi-monthly monetary policy statement for 2014-15, RBI Governor Raghuram Rajan on much expected lines, decided to pause and not disturb status quo and thereby left the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent. Besides, it also left other policy instruments such as Cash Reserve Ratio (CRR) also remain unchanged at 4%. Consequently, the reverse repo rate under the LAF and the marginal standing facility (MSF) rate and the Bank Rate stood unchanged at 7.00 per cent and 9.00 per cent respectively.

On April fool’s day, the only thing surprising was the lack of surprise in RBI’s monetary policy stance which was on much expected lines after India's consumer price index (CPI) inflation eased to 8.10 percent in February, near the RBI's January 2015 target of 8 percent, while the wholesale price index slowed to a 9-month low of 4.68 percent.

However, in a bit of a twist, India’s central bank, in order to reduce dependence on overnight borrowing rates, decided to increase the liquidity provided under 7-day and 14 day term repos from 0.5 per cent of NDTL of the banking system to 0.75 per cent, and decrease the liquidity provided under overnight repos under the LAF from 0.5 per cent of bank-wise NDTL to 0.25 per cent with immediate effect.

Sounding cautious, RBI highlighted downside risks to the central estimate of 5.5 per cent for growth, while projecting real GDP growth to pick up from a little below 5 per cent in 2013-14 to a range of 5 to 6 per cent in 2014-15. Worryingly, it also said that 'lead indicators do not point to any sustained revival in industry and services as yet, and the outlook for the agricultural sector was contingent upon the timely arrival and spread of the monsoon'.

Importantly on its future policy stance, the Reserve Bank underscored that this would be firmly focused on keeping the economy on a disinflationary glide path that is intended to hit 8 per cent CPI inflation by January 2015 and 6 per cent by January 2016. Further, it also highlighted that it was appropriate in holding the policy rates at this juncture, while allowing the rate increases undertaken during September 2013-January 2014 to work their way through the economy.

With India heading for elections running from April 7 to May 12, RBI Governor Raghuram Rajan apparently wanted to wait for a glimpse of the next government's economic policies as well as the outlook for monsoon season that begin in June before making a policy move. So far, Rajan raised the policy repo rate three times since he took over in September, including a surprise hike in January, but recently toned down his anti-inflation rhetoric, saying the RBI has not yet adopted an internal panel report that proposes inflation targeting.

The CNX Nifty is currently trading at 6,686.15, down by 18.05 points or 0.27% after trading in a range of 6,732.25 and 6,677.85. There were 19 stocks advancing against 31 declining on the index.

The top gainers of the Nifty were Power Grid up by 3.38%, Cairn up by 3.29%, TCS up by 1.87%, HCL Tech up by 1.82% and ONGC up by 1.69%. On the flip side, Hindalco down by 3.17%, Asian Paints down by 2.74%, Kotak Bank down by 2.71%, BPCL down by 2.17% and PNB down by 2.03% were the major losers on the index.

Asian equity indices were in green; Straits Times was up by 0.42% to 3,202.45, Jakarta Composite up by 1.90% to 4,858.97, Hang Seng up by 0.96% to 22,336.37 and Taiwan Weighted was up by 0.27% to 8,873.15 and Shanghai Composite up by 0.60% to 2,044.85. While, Nikkei 225 down by 0.20% to 14,798.63 was the lone loser.