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Sensex, Nifty choppy post RBI policy; ICICI Bank rebounds

11:00

The News International Team
Live Market Commentary

11:48am ICICI Bank gained 0.4 percent and State Bank of India rose 0.2 percent while HDFC and HDFC Bank declined 1-1.7 percent.

Auto stocks remained under pressure; Tata Motors, Mahindra & Mahindra, Bajaj Auto, Hero Motocorp and Maruti Suzuki slipped 0.3-1.8 percent.

11:46am Rajan saysRBI may move towards 4 percent plus/minus 2 percent inflation aim post January 2016.

Banks may be allowed to take over 10 percent equity in loan recasting, he adds.

11:45am The Sensex fell 75.47 points to 28484.15 and the Nifty declined 22.95 points to 8532.95. About 1173 shares have advanced, 1258 shares declined, and 102 shares are unchanged on the Bombay Stock Exchange.

11:40am RBI governor Raghuram Rajan says moderate inflation is a must to sustain healthy growth. “Once we are at 6 percent inflation, we are at edges of long-term target of 4 percent.

According to him, banking Regulation Act for new bank licences doesn’t need changes.

11:35am RBI says Liquidity conditions have eased considerably in Q3 of 2014-15 due to structural and frictional factors, as well as the fine tuning of the liquidity adjustment framework.

“With deposit mobilisation outpacing credit growth and currency demand remaining subdued in relation to past trends, banks are flush with funds, leading a number of banks to reduce deposit rates. The main frictional source of liquidity has been the large release of expenditure/transfers by the government,” it adds.

11:30am RBI says if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle. 

11:25am Rajan says talks with government suggest things are on track w.r.t fiscal deficit. RBI wants more information on whether government can meet FY15 fiscal aim.

“We are not trying to manage long-term interest rates through open market operations,” says Rajan.

11:20am The central estimate of projected growth for 2014-15 has been retained at 5.5 percent (GDP), with a gradual pick-up in momentum through 2015-16 on the assumption of a normal monsoon and no adverse supply/financial shocks, says RBI.

11:15am RBI Governor Raghuram Rajan says policy stance may change in early 2015 if inflation eases, adding hopes to finalise monetary policy framework shortly.

11:10am Over the next 12-month period, inflation is expected to retain some momentum and hover around 6 percent, except for seasonal movements, as the disinflation momentum works through, says the RBI.

Accordingly, the risks to the January 2016 target of 6 percent appear evenly balanced under the current policy stance, it adds.

11:05am RBI sees headline inflation falling

RBI says headline inflation has been receding steadily and current readings are below the January 2015 target of 8 percent as well as the January 2016 target of 6 percent.

“The inflation reading for November – which will become available by mid-December – is expected to show a further softening. Thereafter, however, the favourable base effect that is driving down headline inflation will likely dissipate and inflation for December (data release in mid-January) may well rise above current levels,” it adds.

11:00am Market Check

Equity benchmarks continued to trade with marginal loss after on expected lines, the Reserve Bank of India kept policy rates unchanged. The 30-share BSE Sensex fell 61.15 points to 28498.47 and the Nifty declined 17.30 points to 8538.60.

About 1064 shares have advanced, 1221 shares declined, and 113 shares are unchanged on the Bombay Stock Exchange.

On the basis of an assessment of the current and evolving macroeconomic situation, the RBI has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8 percent and cash reserve ratio of scheduled banks unchanged at 4 percent of net demand and time liabilities (NDTL).

Consequently, the reverse repo rate under the LAF will remain unchanged at 7 percent, and the marginal standing facility (MSF) rate and the Bank Rate at 9 percent, said the RBI.

Private sector lender ICICI Bank rebounded with marginal gains while rivals State Bank of India, HDFC Bank and Axis Bank declined 0.5-1 percent.

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