Indian equity markets gave a big thumbs-up to the Indian central banks' unexpected decision to cut the cash reserve ratio to 5.5% from 6% which underscores a cut of 50 basis points. Sentiments got filliped as the Reserve Bank of India, even while maintaining its anti-inflationary stance attempted to ease the tight liquidity pressure on the economy by cutting the CRR and infusing Rs 32,000 crore into the Indian banking system. Marketmen even went ahead to overlook the RBI's economic growth forecast for the current fiscal which it lowered to 7% from 7.6% earlier in addition credit growth estimates too were lowered to 16% from 18% while the central bank kept inflation forecast unchanged. Nevertheless, sentiments remained extremely bullish as investors piled up hefty positions not only in heavyweight stocks but largely across the board amid hopes that the RBI will not only focus on containing inflation but also on easing liquidity pressure to spur economic growth which has been adversely impacted due the RBI's aggressive monetary tightening measures since March 2010. The frontline indices capitalized on the momentum and remained in euphoric mood for most part of the session and even sailed beyond various crucial levels. However, the key gauges faced some resistance around the psychological 5,150 (Nifty) and 17,000 (Sensex) levels on the back of pessimistic leads from European markets which pulled the key gauges off the day's highs. Investors also turned cautious by the end as they shifted their focus to January series F&O contract expiry scheduled on Wednesday. In the global space, on a day when major Asian equity markets were off for trading, the Japanese and Indonesian benchmarks were the only indices which remained open and settled on a positive note. However, the European markets traded on a negative note as there was no headway in negotiations between European ministers and Greek bondholders over how to resolve the nation's debt crisis.
Earlier on Dalal Street, the benchmark got off to a cautiously positive start tracking the supportive moves in Japanese and Indonesian markets. The indices kept hovering above the previous closing levels in a narrow range waiting for the announcement of RBI's all important policy announcements. Thereafter, the RBI's CRR cut triggered sharp rally in local equities thanks to across the board buying but some profit booking in the dying moments took some sheen off the rally. Eventually, the NSE's 50-share broadly followed index Nifty, garnered over one and half a percent to settle well above the crucial 5,100 support level while Bombay Stock Exchange's Sensitive Index Sensex accumulated around two hundred fifty points and ended just below the psychological 17,000 mark. Moreover, the broader markets settled on an optimistic note but failed to match the fervor with which their larger peers rallied. On the BSE sectoral space, the Capital Goods counter garnered a lot of traction to settle as the top gainer with over three percent gains, thanks to the close to six percent rally in heavyweight L&T which announced strong third quarter earnings on Monday. The banking index too surged with similar gains post the RBI's policy action while, encouraging earnings announcement by Yes Bank too supported to sentiments. While there were no laggards in the space, however some individual stocks like Coal India and Sun Pharma plunged over a percent. The markets spurted on extremely large volumes of over Rs 2.27 lakh core while the turnover for NSE F&O segment also remained on the higher side as compared to that on Monday at over Rs 2.05 lakh crore as January series futures and options contract are scheduled to expire a day earlier from its usual closing owing to a national holiday on the last Thursday of the month. The market breadth remained positive as there were 1592 shares on the gaining side against 1206 shares on the losing side while 142 shares remained unchanged.
Finally, the BSE Sensex surged 244.04 points or 1.46% to settle at 16,995.77, while the S&P CNX Nifty soared by 81.10 points or 1.61% to close at 5,127.35.
The BSE Sensex touched a high and a low of 17,050.32 and 16,770.01 respectively. The BSE Mid cap and Small cap indices were up by 1.38% and 0.70% respectively.
The major gainers on the Sensex were L&T up 5.64%, SBI up 5.19%, Hindalco up 4.55%, M&M up 3.56% and ICICI Bank up 3.30%. While, Coal India down 1.35%, Sun Pharma down 1.29%, NTPC down 0.94%, GAIL India down 0.72% and Hindustan Unilever down 0.52%, were the major losers on the index.
On the BSE sectoral space, Capital Goods (CG) up 3.30%, Bankex up 3.21%, Metal up 1.78%, Auto up 1.53% and Realty up 1.14% were the top gainers, while there was no loser on the sectoral space.
Meanwhile, India's trade with the ASEAN countries is expected to grow to $70 Billion by 2012. These expectations are based on the fact that trade between India and ASEAN countries has been growing at a rate of 18-20% every year. In 2011, trade crossed the $50 billion mark and hence targets for the year 2012 have been pegged at $70 billion, a growth of 20%. Since its start about a decade ago, the partnership between India and the Association of South East Asian Nations (ASEAN) comprising Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam has been developing at quite a fast pace. Between 1993 and 2003, ASEAN-India bilateral trade grew at an annual rate of 11.2%, from $ 2.9 billion in 1993 to $ 12.1 billion in 2003. In 2008, the total volume of ASEAN-India trade was $ 47.5 billion and it crossed the $ 50 billion mark in 2011.
The India-ASEAN Free Trade Agreement (FTA) is expected to further increase goods trade between India and ASEAN countries. India has a Comprehensive Economic Cooperation Agreement (CECA) signed with Singapore and FTAs with Malaysia, Indonesia and Thailand. India and ASEAN are currently negotiating agreements on trade in services and investment. The services negotiations are taking place on a request-offer basis, wherein both sides make requests for the openings they seek and offers are made by the receiving country based on the requests.
India has made requests in a number of areas including teaching, nursing, architecture, chartered accountancy and medicine as it has a large number of English speaking professionals in these areas who can gain from job opportunities in the ASEAN region. India is also keen on expanding its telecom, IT, tourism and banking network in ASEAN countries.
The S&P CNX Nifty touched a high and low of 5,141.05 and 5,049.80 respectively.
The top gainers on the Nifty were L&T up 5.93%, IDFC up 5.53%, SBI up 5.33%, JP Associates up 4.68% and Hindalco up 4.48%.
On the flip side, Grasim down 2.32%, Coal India down 1.57%, DLF down 1.05%, Sun Pharma down 0.95% and HUL down 0.77% were the top losers on the index.
The European markets were trading in red. France's CAC 40 down 0.84%, Britain's FTSE 100 down 0.74% and Germany's DAX down by 1.03%.
Only a handful of markets remained open for trade in Asia, where Japanese Nikkei average rose to its highest closing level in nearly three months on Tuesday on expectations that a Greek debt swap deal will still be reached even after European finance ministers rejected an offer by Greece's private creditors. Moreover, the Bank of Japan kept interest rates on hold at near-zero on Tuesday, noting that activity in the Japanese economy has been more or less flat due to a slowdown in overseas economies and appreciation of the yen.
Activity was thin, however, with many Asian markets still closed for the Lunar New Year holiday. Despite the thin trading, some notable movers emerged, with chip maker Elpida Memory Inc. jumping 4.6% after a Yomiuri Shimbun report that the firm is set to agree on an alliance with US company -- Micron Technology and Taiwan's -- Nanya Technology Corp. Shares of Toyota Motor gained 2.7%. The auto maker announced late Monday that it would cut 350 jobs at a plant in Australia, in part due to the high Australian dollar.
Nikkei 225 was up by 19.43 points or 0.22% to 8,785.33 and Jakarta Composite was up 8.07 points or 0.20% to 3,994.58.
Stock markets in China, Hong Kong, Malaysia, South Korea, Singapore and Taiwan remained closed on Tuesday in observance of Lunar New Year holiday.
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