Trade on the Dalal Street remained extremely volatile
on the last trading day of the week with indices surging to the high
points of the day by noon and after recovery, losing their traction once
again in the final hours to close flat with a positive bias. The
boisterous start tracking the jubilant global cues took a halt with the
announcement of another rate hike by the Reserve Bank of India. It was
the 12th hike in last 18 months by the central bank to curb the
inflation menace, that took the markets lower all of a sudden. Though
there was instant recovery after the knee-jerk reaction but that could
not sustain till last and the final hour profit booking took the sheen
out of the markets. The global markets though remained mostly in
fine fettle, while the US markets surged overnight; the Asian markets
followed the lead after major European central banks and Fed agreed to
provide three major loan installments to financial institutions on the
continent that are reeling under debt burden. European shares gained as
finance ministers gathered in Poland to tackle the region's debt crisis.
Back home, the domestic markets got a gap-up start and started moving higher in tandem with the other regional peers after the developments in the Europe that eased the concern of global community of debt default by some nations in the region. Benchmarks which crossed their crucial psychological levels of 17000 (Sensex) and 5100 (Nifty) remained in a tight range till noon and got a spike up to reach the highs of the day but the announcement of another rate hike by RBI, brought a sharp sell-off at that levels and the markets slipped near the neutral line, the lowest point of the day. However, the 25 basis point of hike was already factored in and the markets regained strength, though trade remained choppy in the remaining trade and barring some selective counters others seemed in a mood to take some breather. The Reserve Bank of India, maintaining its hawkish tone, in its mid-quarter monetary policy review and hiked short term leading and borrowing rates. Repo rate has been increased by 25 basis points to 8.25%, while the reverse repo rate got adjusted at 7.25%, however the cash reserve ratio (CRR) was kept unchanged at 6%. Consumer loans are likely to get dearer with the hike but still all the rate sensitives managed a positive close, with realty and auto gaining over a percent each. The PSU oil marketing companies remained buzzing as the petrol prices were hiked by Rs 3.14/litre from Thursday midnight after rupee touched two-year low against the US dollar. Meanwhile, they lost their way in the fag end of trade on reports that the meeting of a panel of ministers headed by Finance Minister Pranab Mukherjee on limiting the supply of subsidised LPG has been deferred after apparent objections from some UPA constituents. Though one stock that remained in limelight from the oil block was ONGC, which moved higher after the government put the company's FPO on hold, it was reported that the FPO has been pushed back due to price mismatch, the stock moved higher by around 6 percent. The export oriented stocks too gave mixed response after the government announced new drawback scheme. All items, which are currently covered under the DEPB scheme, will migrate, transit to the drawback scheme. As per the scheme the rates will be effective from 3% to 5.5%. But for certain items including textiles and some other items, it will be even as high as 10%.Commercial vehicles rate has been kept at 5.5%.The beneficiaries of the existing DEPB scheme will now have to switch over to the new scheme. On the sectoral front PSU remained the top gainers led by ONGC, closely followed by power, realty and auto, while FMCG, IT and technology witnessed some profit booking. The broader indices too met a flat ending and the market breadth remained in favour of decline with 1337 stocks advancing against 1460 declining ones, while 134 scrips remained unchanged. The total turnover remained on the higher side crossing over 1.55 lakh crore for the day.
Finally, the BSE Sensex gained 57.29 points or 0.34% to settle at 16,933.83, while the S&P CNX Nifty rose by 8.55 points or 0.17% to close at 5,084.25.
The BSE Sensex touched a high and a low of 17,122.54 and 16,889.58 respectively. The BSE Mid cap index was up by 0.36% and Small cap index was down by 0.01%.
The top gainers on the Sensex were Tata Motors up 7.02%, ONGC up 5.61%, NTPC up 4.75%, Sterlite Industries up 3.66%, and Tata Power up by 2.69%.
On the flip side, Hindustan Unilever down 2.65%, Wipro down 2.37%, BHEL down 1.39%, Tata Steel down 1.30% and Jindal Steel down 1.10% were the top losers on the index.
The top gainers on the BSE sectoral space were PSU up 1.66%, Power up 1.55%, Realty up 1.26%, Auto up 1.14% and Consumer Durables (CD) up 0.65%. While, FMCG down 1.22%, IT down 0.86% and TECk down 0.70% were the top losers on the BSE sectoral space.
Meanwhile, the Reserve Bank of India (RBI), by maintaining the anti-inflationary stance, in its mid-quarter review of monetary policy hiked short term leading and borrowing rates for the 12th time in last 18 months. The RBI has increased repo rate by 25 basis points to 8.25%, while the reverse repo rate gets adjusted at 7.25%, however it kept cash reserve ratio (CRR) unchanged at 6%.
Post the policy hike, it is widely expected that the commercial banks will pass on the interest rate burden to customers, which could made consumer and corporate loans expensive, even while raising the interest outgo on existing loans, along with a longer tenure for repayment. Experts from the industry and public sectors expected the central bank to raise rates and then pause in a tightening cycle, as increased interest rates have raised the cost of capital significantly, thus hurting the pace of investment and growth in the Asia's third largest economy.
The GDP growth declined to an 18-month low level of 7.7% in April-June 2011 from 8.8% in April-June 2010, following the slowdown in industrial production growth in July to 3.3%, which is the lowest in 21-months. However, RBI maintained its anti-inflationary stance as headline inflation, measured by wholesale price index (WPI), remained at elevated level. Headline inflation for the month of August stood at 9.78% from 9.22% in July, and the latest surge in inflation was driven by increase in prices of food and manufacturing products. The persisting inflation echoed the need for continued tightening. However, RBI expects inflation to moderate in second half of current financial year from the current elevated level. On the global front as well, lead indicators such as purchasing managers' indices (PMIs) suggest a further moderation in economic activity in Q3, with the global manufacturing PMI approaching the neutral level of 50. On the whole global economy slowed in Q2 (April-June) of 2011.
On the recent hike in petrol prices and its impact on inflation the RBI said, 'the oil marketing companies raised the price of petrol by Rs 3.14 per litre with effect from September 16, 2011. This will have a direct impact of 7 basis points to WPI inflation, in addition to indirect impact with a lag.' RBI expects growth momentum in India's exports may not sustain in coming months. By adding further it said, 'growth momentum is weakening in the advanced economies amidst heightened concerns that recovery may take longer than expected earlier. Although India's exports have performed extremely well in the recent period, this trend is unlikely to be sustained in the face of weakening global demand.'
By accepting that the RBI's monetary policy hurting the pace of economic growth, it said 'combined with the slowing down of domestic demand, to which the monetary policy stance is also contributing, suggests that risks to the growth projection for 2011-12 made in the July Review are on the downside.' However, in the current scenario, with the likelihood of inflation remaining high for the next few months, rising inflationary expectations remain a key risk. This makes it imperative to persevere with the current anti-inflationary stance' the RBI said in its mid-quarter review of monetary policy statement.
Going forward, the stance will be influenced by signs of downward movement in the inflation trajectory, to which the moderation in demand is expected to contribute, and the implications of global developments.
The S&P CNX Nifty touched high and low of 5,143.60 and 5,068.10, respectively.
The top gainers of the Nifty were Tata Motors up 6.12%, ONGC up 5.58%, NTPC up 4.41%, Sterlite Industries up 3.54% and Powergrid up 3.49%.
On the flip side, Ambuja Cement down 4.96%, HCL Tech down 4.01%, RCom down 2.96%, Wipro down 2.74% and Reliance Capital down 2.69% were the top losers on the index.
The European markets were trading in green. France's CAC 40 advanced 0.92%, Britain's FTSE soared by 0.98%, and Germany's DAX surged 1.63%.
Back home, the domestic markets got a gap-up start and started moving higher in tandem with the other regional peers after the developments in the Europe that eased the concern of global community of debt default by some nations in the region. Benchmarks which crossed their crucial psychological levels of 17000 (Sensex) and 5100 (Nifty) remained in a tight range till noon and got a spike up to reach the highs of the day but the announcement of another rate hike by RBI, brought a sharp sell-off at that levels and the markets slipped near the neutral line, the lowest point of the day. However, the 25 basis point of hike was already factored in and the markets regained strength, though trade remained choppy in the remaining trade and barring some selective counters others seemed in a mood to take some breather. The Reserve Bank of India, maintaining its hawkish tone, in its mid-quarter monetary policy review and hiked short term leading and borrowing rates. Repo rate has been increased by 25 basis points to 8.25%, while the reverse repo rate got adjusted at 7.25%, however the cash reserve ratio (CRR) was kept unchanged at 6%. Consumer loans are likely to get dearer with the hike but still all the rate sensitives managed a positive close, with realty and auto gaining over a percent each. The PSU oil marketing companies remained buzzing as the petrol prices were hiked by Rs 3.14/litre from Thursday midnight after rupee touched two-year low against the US dollar. Meanwhile, they lost their way in the fag end of trade on reports that the meeting of a panel of ministers headed by Finance Minister Pranab Mukherjee on limiting the supply of subsidised LPG has been deferred after apparent objections from some UPA constituents. Though one stock that remained in limelight from the oil block was ONGC, which moved higher after the government put the company's FPO on hold, it was reported that the FPO has been pushed back due to price mismatch, the stock moved higher by around 6 percent. The export oriented stocks too gave mixed response after the government announced new drawback scheme. All items, which are currently covered under the DEPB scheme, will migrate, transit to the drawback scheme. As per the scheme the rates will be effective from 3% to 5.5%. But for certain items including textiles and some other items, it will be even as high as 10%.Commercial vehicles rate has been kept at 5.5%.The beneficiaries of the existing DEPB scheme will now have to switch over to the new scheme. On the sectoral front PSU remained the top gainers led by ONGC, closely followed by power, realty and auto, while FMCG, IT and technology witnessed some profit booking. The broader indices too met a flat ending and the market breadth remained in favour of decline with 1337 stocks advancing against 1460 declining ones, while 134 scrips remained unchanged. The total turnover remained on the higher side crossing over 1.55 lakh crore for the day.
Finally, the BSE Sensex gained 57.29 points or 0.34% to settle at 16,933.83, while the S&P CNX Nifty rose by 8.55 points or 0.17% to close at 5,084.25.
The BSE Sensex touched a high and a low of 17,122.54 and 16,889.58 respectively. The BSE Mid cap index was up by 0.36% and Small cap index was down by 0.01%.
The top gainers on the Sensex were Tata Motors up 7.02%, ONGC up 5.61%, NTPC up 4.75%, Sterlite Industries up 3.66%, and Tata Power up by 2.69%.
On the flip side, Hindustan Unilever down 2.65%, Wipro down 2.37%, BHEL down 1.39%, Tata Steel down 1.30% and Jindal Steel down 1.10% were the top losers on the index.
The top gainers on the BSE sectoral space were PSU up 1.66%, Power up 1.55%, Realty up 1.26%, Auto up 1.14% and Consumer Durables (CD) up 0.65%. While, FMCG down 1.22%, IT down 0.86% and TECk down 0.70% were the top losers on the BSE sectoral space.
Meanwhile, the Reserve Bank of India (RBI), by maintaining the anti-inflationary stance, in its mid-quarter review of monetary policy hiked short term leading and borrowing rates for the 12th time in last 18 months. The RBI has increased repo rate by 25 basis points to 8.25%, while the reverse repo rate gets adjusted at 7.25%, however it kept cash reserve ratio (CRR) unchanged at 6%.
Post the policy hike, it is widely expected that the commercial banks will pass on the interest rate burden to customers, which could made consumer and corporate loans expensive, even while raising the interest outgo on existing loans, along with a longer tenure for repayment. Experts from the industry and public sectors expected the central bank to raise rates and then pause in a tightening cycle, as increased interest rates have raised the cost of capital significantly, thus hurting the pace of investment and growth in the Asia's third largest economy.
The GDP growth declined to an 18-month low level of 7.7% in April-June 2011 from 8.8% in April-June 2010, following the slowdown in industrial production growth in July to 3.3%, which is the lowest in 21-months. However, RBI maintained its anti-inflationary stance as headline inflation, measured by wholesale price index (WPI), remained at elevated level. Headline inflation for the month of August stood at 9.78% from 9.22% in July, and the latest surge in inflation was driven by increase in prices of food and manufacturing products. The persisting inflation echoed the need for continued tightening. However, RBI expects inflation to moderate in second half of current financial year from the current elevated level. On the global front as well, lead indicators such as purchasing managers' indices (PMIs) suggest a further moderation in economic activity in Q3, with the global manufacturing PMI approaching the neutral level of 50. On the whole global economy slowed in Q2 (April-June) of 2011.
On the recent hike in petrol prices and its impact on inflation the RBI said, 'the oil marketing companies raised the price of petrol by Rs 3.14 per litre with effect from September 16, 2011. This will have a direct impact of 7 basis points to WPI inflation, in addition to indirect impact with a lag.' RBI expects growth momentum in India's exports may not sustain in coming months. By adding further it said, 'growth momentum is weakening in the advanced economies amidst heightened concerns that recovery may take longer than expected earlier. Although India's exports have performed extremely well in the recent period, this trend is unlikely to be sustained in the face of weakening global demand.'
By accepting that the RBI's monetary policy hurting the pace of economic growth, it said 'combined with the slowing down of domestic demand, to which the monetary policy stance is also contributing, suggests that risks to the growth projection for 2011-12 made in the July Review are on the downside.' However, in the current scenario, with the likelihood of inflation remaining high for the next few months, rising inflationary expectations remain a key risk. This makes it imperative to persevere with the current anti-inflationary stance' the RBI said in its mid-quarter review of monetary policy statement.
Going forward, the stance will be influenced by signs of downward movement in the inflation trajectory, to which the moderation in demand is expected to contribute, and the implications of global developments.
The S&P CNX Nifty touched high and low of 5,143.60 and 5,068.10, respectively.
The top gainers of the Nifty were Tata Motors up 6.12%, ONGC up 5.58%, NTPC up 4.41%, Sterlite Industries up 3.54% and Powergrid up 3.49%.
On the flip side, Ambuja Cement down 4.96%, HCL Tech down 4.01%, RCom down 2.96%, Wipro down 2.74% and Reliance Capital down 2.69% were the top losers on the index.
The European markets were trading in green. France's CAC 40 advanced 0.92%, Britain's FTSE soared by 0.98%, and Germany's DAX surged 1.63%.
All the Asian
equity indices finished the day's trade in the positive terrain on last
trading day of the week, led by exporters and financial issues as
worries eased over struggling European banks after major central banks
around the world will cooperate to offer three-month US dollar loans to
commercial banks in order to prevent money markets from freezing up in
the wake of Europe's sovereign debt crisis. The European Central Bank
has decided, in coordination with the (US) Federal Reserve, the Bank of
England, the Bank of Japan and the Swiss National Bank, to conduct three
US dollar liquidity-providing operations with a maturity of
approximately three months covering the end of the year. Moreover,
China's benchmark Shanghai Composite ended with marginal gains,
supported by a rebound in banking shares, which were biggest drag in the
previous session. However, KLSE Composite was not trading today.
However, Malaysian index KLSE Composite remained closed for trade today.
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