Post Session: Quick Review

The first trading session of the New Financial Year turned out to be optimistic for Indian equity markets,  which altering between green and red zone, finally tied up modest gains of over quarter a percent and ended above the crucial 22,450 (Sensex)  and 6700 levels (Nifty) levels. RBI’s first bi-monthly monetary policy more or less turned out to be non-event for equity markets that failed to have any kind of impact on the markets. Though, bit of rise was witnessed as a knee-jerk reaction to the policy stance, markets soon lost the euphoria and reversed all their gains to trade into negative territory. However, late hour buying which took place during the session mainly aided benchmarks to register to fifth straight session of gains. Nonetheless, broader indices too managed to pull up a positive show, with Small-cap index outperforming larger peers and ending with gains of close to half a percent and Midcap index just about managing to end in green with positive bias.

On the fool’s day, RBI Governor Raghuram Rajan, on much expected lines in the first bi-monthly monetary policy statement for 2014-15, decided to pause and 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) unchanged at 4%. This anticipated move failed to excite banking stocks, which witnessing massive thrashing, ended with massive cut of over a percent.

On the global front, Asian stocks ended mostly higher on Tuesday, overcoming weakness from early session, after official data showed a better-than-expected expansion in Chinese manufacturing activity.  Hong Kong’s Hang Seng Index and Shanghai Composite rose after China’s official Purchasing Managers Index rose to 50.3 in March, a touch higher than the 50.2 seen in February. A score below 50 indicates an expansion in manufacturing activity on the previous month, whereas a reading below that indicates a contraction. Additionally, European stocks got off to a brisk start in the second quarter, with merger-and-acquisition activity driving gains by industrial and mining stocks.

Closer home, sentiment in early deals were also dampened after conditions in India’s manufacturing sector signaled a slight 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 Information Technology (IT), Consumer Durables and Technology counters emerged as pillars of strength for local equity markets, while those from banking and Realty and Capital Goods counters were the pockets of weakness. Additionally, Auto stocks too drove high on reporting monthly sales number, while sugar stocks were in sweet spot for the session. Among, non-sectoral gauge, 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 market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1,583: 1,125, while 144 scrips remained unchanged. (Provisional)

The BSE Sensex gained 60.17 points or 0.27% to settle at 22,446.44. The index touched a high and a low of 22,485.77 and 22,295.65 respectively. Among the 30-share Sensex, 15 stocks gained, while 15 stocks declined. (Provisional)

The BSE Mid cap and Small cap indices ended higher by 0.04% and 0.49% respectively. (Provisional)

On the BSE Sectoral front, IT up by 1.65%, Consumer Durables up by 1.33%, Teck up by 1.27%, Oil & Gas up by 1.09% and Healthcare up by 0.54% were the top gainers, while Bankex down by 1.18%, Realty down by 0.85% and Capital Goods down by 0.32% were the top losers in the space. (Provisional)

The top gainers on the Sensex were Wipro up by 3.30%, SSLT up by 2.08%, TCS up by 2.08%, Tata Steel up by 1.89% and Mahindra & Mahindra up by 1.77%. On the other hand, Hindalco down by 2.54%, Maruti Suzuki down by 2.04%, ICICI Bank down by 1.74%, HDFC Bank down by 1.44% and BHEL down by 1.32% were the top losers in the index. (Provisional)

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.

India VIX, a gauge for markets short-term expectation of volatility lost 5.24% at 18.63 from its previous close of 21.62 on Monday. (Provisional)

The CNX Nifty gained 16.85 points or 0.25% to settle at 6,721.05. The index touched high and low of 6,732.25 and 6,675.45 respectively. Out of the 50 stocks on the Nifty, 25 ended in the green, while 25 ended in the red. 

The major gainers of the Nifty were Cairn up 3.39%, Wipro up by 3.41%, Power Grid up by 2.86%, Bank of Baroda up by 2.37% and M&M up by 2.03%. The key losers were BPCL down by 2.88%, Hindalco down by 2.36%, Maruti Suzuki down by 2.18%, Kotak Bank down by 2.10% and Asian Paint down by 1.79%. (Provisional)

The European markets were trading in green; France’s CAC 40 was up by 0.71%, Germany’s DAX was up by 0.52% and UK’s FTSE 100 up by 0.42%.

The Asian markets barring KLSE Composite and Nikkei 225 concluded Tuesday’s trade mostly in green after the Fed chair Janet Yellen stated that the central bank will extend extraordinary support for the economy for some time to come. Chinese Manufacturing PMI also rose to an annual rate of 50.3, from 50.2 in the preceding month. However, China’s manufacturing engine contracted in the first quarter of 2014, adding to market expectations of government stimulus to arrest a loss of momentum in the world’s second-largest economy this year. The final Markit/HSBC Purchasing Managers’ Index (PMI) fell to an eight-month low of 48.0 in March from February’s final reading of 48.5. The outcome was in line with last week’s preliminary PMI reading of 48.1.

Indonesian Inflation fell to a seasonally adjusted 7.32%, from 7.75% in the preceding month while Trade Balance rose to a seasonally adjusted 0.79B, from -0.44B in the preceding month. Thai CPI rose to a seasonally adjusted annual rate of 2.11%, from 1.96% in the preceding month. Japan’s Average Cash Earnings rose to a seasonally adjusted 0.0%, from -0.2% in the preceding quarter.