The News International Team
The market fell further on Tuesday after Reserve Bank of India kept policy rates unchanged and the government increased excise duty on petrol & diesel. However, the fall was limited due to positive global cues.
The 30-share BSE Sensex declined 115.61 points to close at 28444.01 and the 50-share NSE Nifty slipped below the 8550, down 31.20 points to 8524.70, weighed down by technology, auto and HDFC group stocks.
However, the broader markets outperformed benchmarks with the BSE Midcap and Smallcap indices rising 0.9 percent and 0.55 percent, respectively.
Experts believe it was a consolidation day today. The market seems confident of likely rate cut in early 2015 following indication from the RBI governor Raghuram Rajan, said experts.
Andrew Holland of Ambit Investment continued to be extremely bullish on India. He has a Sensex target of 45000 over the next three years and believes the Nifty will hit 9000 before the Budget.
The big news of the day was that the Reserve Bank of India kept key rates unchanged in its fifth bimonthly monetary policy review, but cut the March 2015-end CPI inflation target to 6 percent from 8 percent earlier.
RBI governor Raghuram Rajan said change in monetary policy stance now would be premature, adding RBI may change stance in early 2015 if inflation falls to 6 percent.
“By not cutting rates the RBI has remained consistent in their policy objective of decisively bringing down inflation and long term inflationary expectations,” said Arvind Sethi, MD & CEO, TATA Asset Management.
He adds that lower post policy bond yields show that the market feels more confident that eventually rates will be much lower.
The 8.4 percent 2024 10-year bond yield declined 0.86 percent to 7.99, which brings treasury gains to PSU banks.
According to Sethi, the recent core growth and PMI data also support RBI’s view that the current level of interest rates is not the main problem affecting growth, and therefore a rate cut at this point would have been premature. However, he believes the rate cut is likely around budget time, if the government is able to hold the deficit to around 4.1 percent.
The government on Monday said October eight core industries’ growth stood at 6.3 percent against 1.9 percent in September, aided by coal, natural gas, electricity, fertiliser, crude oil and petroleum refinery products output.
BSE Bankex closed 0.1 percent higher. Private sector lenders ICICI Bank and Axis Bank gained 0.7 percent and 0.6 percent, respectively while rival State Bank of India fell 0.2 percent. HDFC Bank lost 0.8 percent and housing finance company HDFC was down 1.5 percent.
Oil marketing companies like BPCL, HPCL and IOC were down 4.3 percent, 1.6 percent and 2.55 percent, respectively after the government hiked excise duty on petrol by Rs 2.25 per litre and diesel by Re 1 per litre.
Auto stocks remained under pressure following weak November sales data. Tata Motors, Hero Motocorp, Bajaj Auto and Mahindra & Mahindra slipped 1-2 percent. Maruti Suzuki was down 0.85 percent on profit booking.
Software services firm Infosys dropped more than 2 percent after the scrip adjusted for bonus issue in the ratio of one share for every one share held.
Metals stocks gained on hopes of more stimulus from China. Jindal Steel, Hindalco, NMDC, Sesa Sterlite and Tata Steel rallied 1-5 percent.
Among others, Asian Paints lost 3.4 percent. Gail India shed 2.9 percent and TCS fell over a percent while Larsen & Toubro, Bharti Airtel and HDFC climbed 1-2 percent.
In the broader space, Sun Pharma Advanced Research, Wockhardt, EIH, Astra Microwave, Jet Airways, Karnataka Bank, Allahabad Bank, Syndicate Bank, Archies, Mercator, Gitanjali Gems, UCO Bank, Andhra Bank and Exide Industries rallied 4-10 percent.
Global markets were upbeat today with the China’s Shanghai rising 3 percent on hopes of more stimulus. European markets like FTSE, CAC and DAX were higher by 0.5-1 percent (at 16 hours IST).