NARROW RANGE

Stock markets in India continued to trade on an uninspiring note in Wednesday afternoon trades as the benchmark equity indices traded with around a quarter percent gains. It is turning out to be a choppy session of trade with the frontline indices trading in an extremely tight range. The psychological 16,900 (Sensex) and 5,100 (Nifty) levels were proving as strong support levels as the key indices despite repeated attempts refuse to go substantially below those levels. Domestic markets showed signs of consolidation after previous session's close to a percent gains. However, the local markets failed to match the fervor that was evident in most Asian markets as market participants globally remained hopeful that the US Fed would employ quantitative easing measures to boost growth in world's largest economy. But, markets in Europe were exhibiting subdued trends ahead of the US FOMC outcome in which the central bank is expected to announce stimulus package. On the domestic front, cues from the money market remained lackluster though the rupee came off the lows of the day and inched below the 56 per dollar levels. Meanwhile, stocks from the cement sector traded on a somber note with majors like Ultra Tech, Ambuja and Shree Cement plunging between 1-2% as competition commission of India (CCI) is soon expected to come out with its report on cement cartelization, which is likely to spell havoc for not less than eleven major cement manufacturers who were found guilty of being involved in price cartel. It is believed that the CCI will panelize the cement manufacturers by about Rs 3,000 crore. Out of the eleven companies, UltraTech Cement, Ambuja Cements and ACC are expected to be impacted the most since they control a third of the volumes in India. On the BSE sectoral space, buying was evident in the defensive Healthcare, Capital Goods and Power counters which surged over a percent and supported the benchmark indices. On the flipside, the falls in high beta Realty and TECk sectors by over a quarter percent each exerted pressure on the bourses.

Moreover, the broader markets traded on positive note with moderate gains of over half a percent and outperformed their larger peers by a notable margin. The bourses rose on good volumes of over Rs 0.7 lakh crore while the market breadth on BSE was in favor of advances in the ratio of 1477:912 while 155 scrips remained unchanged.

The BSE Sensex is currently trading at 16,890.46 up by 30.66 points or 0.61% after trading as high as 16,943.55 and as low as 16,864.64. There were 20 stocks advancing against 10 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index climbed 0.61% and Small cap index advanced 0.66%.

On the BSE sectoral space, Healthcare up 1.09%, Capital Goods up 1.08%, Power up 1.06%, Auto up 0.99% and Consumer Durables up 0.82% were the major gainers, while Realty down 0.35%, TECk down 0.27%, IT down 0.19% and FMCG down 0.11% were the only laggards in the space.

Dr Reddy's up 3.57%, Tata Motors up 3.34%, BHEL up 2.41%, Jindal Steel up 2.35% and Hero Moto up 1.89% were the major gainers on the Sensex, while Coal India down 1.73%, Bharti Airtel down 1.32%, Hindalco down 1.06%, HDFC Bank down 0.89% and ITC down 0.84% were the major losers in the index.

Meanwhile, defending the Reserve Bank of India's (RBI) status quo on key interest rates in its mid-quarter monetary policy review, Governor D Subbarao explained that the central bank chose to keep its focus on reining in the inflationary pressure on the economy rather than stimulating economic momentum since inflation at 7.55% in May was above tolerance levels. In order to lead the economy on a sustainable growth path in the long run, he pointed that some sacrifice in growth was an unavoidable price to pay and liquidity tightening was essential to support growth in the medium-term with low and stable inflation.

Subbarao opined that the rate of price rise in food products was not cyclical but structural as consumption is not likely to increase in the same proportion with the rise in income levels. According to him, reigning in inflationary pressure was the top priority of the RBI as persistent inflation, irrespective of the drivers, runs the risk of unbalancing inflation expectations. Hitting out at the critics he stated that contrary to popular perception, the RBI studies all inflation indicators at disaggregated level to assess the inflation dynamics, highlighting that core inflation is higher than the recent long period average of 4 percent while, consumer price inflation was at 10.4 percent in May 2012 which was high and still on the uptrend.

On June 18, the RBI, often regarded as one of the world's most aggressive central banks, lived up to the tag as they dashed all hopes of slashing key interest rates by leaving them unmoved in its recent mid-quarter monetary policy review meet. The RBI maintained status quo on the repo rate, rate at which banks borrow money from RBI, keeping it unchanged from its 8 percent levels. Consequently, the reverse repo rate, rate at which Reserve Bank borrows money from banks, under the liquidity adjustment facility (LAF) remained unchanged at 7.0 percent.

The central bank's move defied wider market expectations of a cut in key interest rates by 25 basis points as they expected RBI to employ monetary easing measures to bring the economy out of doldrums. The policy decision had stunned financial markets and even the Commerce and Industry Minister Anand Sharma had vowed to take up the matter with the Finance Minister and the RBI Governor.

The RBI Governor also underscored that apart from global financial woes, deteriorating domestic factors have triggered the sharp depreciation in rupee against the US dollar. The beleaguered Indian currency has fallen 19.3 percent since August 2011 and has been Asia's worst performing currency so far this year. Among the currencies in the BRIC bloc, he said the Brazilian Real had witnessed the largest depreciation followed by the rupee during this period. The growing current account deficit, the relative inelasticity of imports and high inflation had negatively impacted the rupee. In 2011-12, while exports sniffed at $304 billion, imports crossed $486 billion, out of which $155.6 billion were crude and $66.1 billion were gold imports.

The S&P CNX Nifty is currently trading at 5,114.50, higher by 10.65 points or 0.21% after trading as high as 5,134.65 and as low as 5,106.10. There were 34 stocks advancing against 16 declines on the index.

The top gainers on the Nifty were Tata Motors up 3%, HCL Tech up 2.87%, Dr Reddy's up 2.80%, Sesa Goa up 2.54% and Jindal Steel up 2.53%.

Ambuja Cement down 2.80%, Coal India down 1.86%, DLF down 1.78%, Bharti Airtel down 1.44% and HDFC Bank down 1.16% were the major losers on the index.

In the Asian space, Hang Seng climbed 0.64%, Jakarta Composite surged 0.91%, KLSE Composite gained 0.24%, Nikkei 225 soared 1.11%, Straits Times Index rose 0.32% and KOSPI Composite Index ascended 0.65% and Taiwan Weighted amassed 0.85%.

On the other hand only Shanghai Composite declined 0.33%.

The European markets got off to a flat start as France's CAC 40 rose 0.09%, Germany's DAX eased 0.04% and the United Kingdom's FTSE 100 fell 0.11%.