Post session - Quick review

Turning out to be the underperformer amongst the globe, Indian equity markets relinquished all the early gains to end down in dumps after Reserve Bank of India (RBI), furthering its over two-year-old anti-inflationary stand, disappointed the street by leaving the key cash reserve ratio (CRR) and policy repo rate untouched at 4.75% and 8% respectively.  Bogged down by the rate sensitive, 30 scrip sensitive index, Sensex got pummeled over a percentage and half points to end above 16700 level. After sneaking past the 17,000 psychological level, the index, witnessed nasty laceration as investor’s unwinding their long position, opened fresh shorts after Reserve Bank of India’s unexpected decision. The widely followed 50 share index, Nifty, on NSE, too lost its 5100 fortress, to end with cut of over century of points.

Focusing on the local macro-issues, Indian equity markets decided their own trajectory, in contrast to the sanguine global leads, as the global indices rallied after Greece managed to avoid 'Drachmageddon'. Asian shares ended higher after Greece's election delivered a slim parliamentary majority to pro-bailout parties, a result seen as crucial to European leaders' efforts to hold the euro together. Meanwhile, European shares too provided positive cues.

Closer home, mayhem was witnessed across the board, however, stocks from Banking, Realty and Fast Moving Consumer Goods counters witnessed the major brunt of profit booking, while stocks from Consumer Durable counter emerged as the sole gainer on the BSE sectoral chart. Meanwhile, some export oriented stocks such as Rajesh Exports and Gitanjali Gems made the most of RBI’s announcement of hiking export credit refinance limit. While, delivering its Mid-quarterly review, the central bank stated that, “to further augment liquidity and encourage banks to increase credit flow to the export sector, RBI has decided to increase the limit of export credit refinance from 15% of outstanding export credit of banks to 50%, move which will potentially release additionally liquidity of over Rs 300 billion, equivalent to about 50 basis points reduction in the Cash Reserve Ratio (CRR).

However, Aviation stocks such as Spice Jet, Jet Airways (India) and Kingfisher Airline flew high in the early deals after jet fuel (ATF) prices were reduced by a massive 5 per cent, the steepest reduction in rates since February 2010. The price of aviation turbine fuel (ATF), or jet fuel, in Delhi was reduced by Rs 3,260 per kl, or 5 per cent, to Rs 62,410 per kl with effect from midnight tonight. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 1028:1661 while 119 scrips remained unchanged. (Provisional)

The BSE Sensex lost 237.14 points or 1.40% and settled at 16,712.69. The index touched a high and a low of 17,109.95 and 16,636.09 respectively. 3 stocks were seen advancing against 27 declining ones on the index (Provisional)

The BSE Mid-cap index lost 1.06% while Small-cap index was down 0.64%. (Provisional)

On the BSE Sectoral front, Consumer Durables up 0.11% was the sole gainer while, Bankex down 3.16%, Realty down 2.80%, FMCG down 1.64%, PSU down 1.25% and Power down 1.16% were the top losers.

The top gainers on the Sensex were Tata Steel up 1.28%, Bajaj Auto up 1.01% and NTPC up 0.03% while, SBI down 4.48%, Sterlite Industries down 4.14%, ICICI Bank down 2.90%, Dr. Reddy’s Lab down 2.81% and HDFC Bank down 2.79% were the top losers in the index. (Provisional)

Meanwhile, furthering the over two-year-old anti-inflationary posture, Reserve Bank of India (RBI), shockingly this time around also preferred to sacrifice growth over inflation and left the key cash reserve ratio (CRR) and policy repo rate untouched at 4.75% and 8% respectively, in its mid-quarter monetary policy review.  The Reserve Bank had frontloaded the policy rate reduction only in April with a cut of 50 basis points. Consequent, to this standstill stance, the reverse repo rate under the LAF will remain unchanged at 7% and the marginal standing facility (MSF) rate and the Bank Rate at 9%. However, the central bank of India to further augment liquidity and encourage banks to increase credit flow to the export sector, increased the limit of export credit refinance from 15% of outstanding export credit of banks to 50%, a move which will potentially release additionally liquidity of over Rs 300 billion, equivalent to about 50 basis points reduction in the CRR.

Uncomfortable with soaring headline inflation, more importantly the Retail Inflation measured as Consumer price index (CPI) inflation, which entered double digits of 10.36% in April from 9.38% in March, the RBI in light of deteriorating global macroeconomic and financial conditions, opted to battle out the inflation demon. During 2011-12, headline WPI inflation rate moderated from a peak of 10% in September 2011 to 7.7% in March 2012. However, during 2012-13 so far, provisional data suggest that it inched up from 7.2% in April to 7.6% in May, driven mainly by food and fuel prices. 'Further reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate inflationary pressures,' the RBI reported in its mid-quarter policy review.  Rupee’s fall, which counterbalanced the positive impact that the wholesale prices index, could have given the decline of the international crude prices, also emerged to be one of the reason behind the standstill policy of RBI.

The central bank, to tackle inflation, raised its key lending rate 13 times since March 2010 but appeared reversing the rate cycle by cutting the repo rate (short-term lending rates) by 50 basis points in April. However, RBI in its forward guidance has clearly stated that the evolving growth-inflation dynamic would continue to influence its decision-making. 'Future actions will depend on a continuing assessment of external and domestic developments that contribute to lowering inflation risks,' the RBI said in its statement.

India VIX, a gauge for market’s short term expectation of volatility lost 11.51% at 22.60 from its previous close of 25.54 on Friday. (Provisional)

The S&P CNX Nifty lost 69.65 points or 1.36% to settle at 5,069.40. The index touched high and low of 5,190.20 and 5,041.70 respectively. 5 stocks advanced against 45 declining ones on the index. (Provisional)

The top gainers on the Nifty were Tata Steel up 1.46%, Power Grid up 1.13%, Bajaj Auto up 1.03%, Cairn India up 1.02% and ACC up 0.43%.On the other hand, DLF down 4.70%, SBI down 4.40%, PNB down 4.08%, Sterlite Industries down 3.75% and Reliance Infrastructure down 3.44% were the top losers. (Provisional)

The European markets were trading in green, with France's CAC 40 up 0.51%, Germany's DAX up 0.72% and Britain’s FTSE 100 up 0.28%.

Buoyed by favourable outcome from Greek election, sentiment in the Asian region continued their bullish run with all the equity indices snapping the day’s trade in the positive terrain on Monday. Greek polls provided hopes that Greece will stay in euro-zone after New Democracy emerged as the largest party with around 30 percent vote share followed by Syriza party with 27 percent vote share. Socialist PASOK won over around 13 percent. Moreover, investors are keenly awaiting the outcomes of US Federal Reserve meeting and G20 summit this week and a European Union leaders summit later this month, which would give markets further direction.

Meanwhile, the results of Greece election were welcomed by the governments of Japan and China -- two of Europe’s biggest creditors -- which called for leaders in Greece to act quickly to form a cabinet. The benchmarks of the country jumped 1.77 percent and 0.40 percent respectively. In addition, Taiwan stocks rose 1.76 percent on Monday, joining other Asian bourses in rallying after Greece’s election result calmed fears of global financial turmoil, with tech stocks leading gains at the expense of defensives such as steel and plastics.