Market shrugs off rate-hike by RBI

Expectations of a normal monsoon this year and optimism about fourth quarter corporate earnings lifted stocks last week as the market shrugged off a rate-hike by the central bank at its annual policy review earlier in the week.

The RBI announced a small increase in policy rates at its monetary policy review on 20 April 2010. It raised repo rate, reverse repo rate and cash reserve ratio (CRR) by 25 basis points each. Analysts were expecting a 25 to 50 basis points hike in short term rates and the CRR. The RBI said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.

The hike in CRR is effective from 24 April 2010 while repo and reverse repo rate hikes were imposed immediately. After the hike, the CRR will increase to 6%, the repo rate to 5.25% and the reverse repo to 3.75%. Repo is the rate at which the central bank lends to banks and reverse repo is the rate at which the central bank absorbs excess cash from the banking system. CRR is the portion of deposits banks must set aside with the RBI.

Foreign institutional investors pumped in Rs 5,249.10 crore in April 2010 and Rs 25,893.50 crore in the calendar year 2010 (till 21 April 2010).

The BSE Sensex rose 103.02 points or 0.59% to 17,694.20 in the week ended Friday, 23 April 2010. The S&P CNX Nifty advanced 41.50 points or 0.78% to 5304.10 in the week.

The BSE Mid-Cap index rose 1.55% and the BSE Small-Cap index rose 2.03% in the week. Both these indices outperformed the Sensex.

The key benchmark indices slumped on Monday, 19 April 2010, as investors shunned risky assets after the US Securities and Exchange Commission charged Goldman Sachs with fraud. The market declined for the fifth straight day. The BSE 30-share Sensex fell 190.50 points or 1.08% to 17,400.68. The S&P CNX Nifty fell 58.95 points or 1.12% to 5203.65.

The key benchmark indices registered small gains, snapping loses in the preceding five trading sessions, on Tuesday, 20 April 2010, after the RBI announced a small increase in policy rates at a monetary policy review. Firm global stocks supported the domestic bourses. The BSE 30-share Sensex rose 59.90 points or 0.34% to 17,460.58. The S&P CNX Nifty gained 26.45 points or 0.51% to 5230.10.

The key indices settled marginally higher on Wednesday, 21 April 2010, extending previous session's gains after the RBI raised interest rates on Tuesday, 20 April 2010, by less than some economists had expected and forecast inflation will slow. The BSE 30-share Sensex rose 11.98 points or 0.07% to 17,472.56. The S&P CNX Nifty rose 14.80 points or 0.28% to 5244.90.

Volatility ruled the roost on Thursday, 22 April 2010, as the key benchmark indices came sharply off the higher level in the last one hour of trade. The late slide materialised soon after a sharp surge in mid-afternoon trade that was driven by rally in pivotals such as State Bank of India (SBI), Reliance Industries (RIL) and Tata Motors. The BSE 30-share Sensex rose 101.43 points or 0.58% to 17,573.99. The S&P CNX Nifty rose 24.45 points or 0.47% to 5269.35.

The key benchmark indices gained for the fourth straight day on Friday, 23 April 2010, on higher European stocks and gains in US index futures. Optimism about the fourth quarter corporate earnings and hopes of a normal monsoon this year aided the rally. The BSE 30-share Sensex rose 120.21 points or 0.68% to 17,694.20. The S&P CNX Nifty gained 34.75 or 0.66% to 5304.10.

State-run State Bank of India was the top Sensex gainer last week. It soared 10.20% to Rs 2255.60. A prominent foreign brokerage reportedly raised its rating on the stock to 'neutral' from 'sell'. Another foreign brokerage has reportedly predicted a re-rating of the counter on the back of an expected lending growth in a rebounding economy.

India's largest truck maker by sales Tata Motors was the second biggest gainer from the Sensex pack. The stock rose 7.64% to Rs 844.60 in the week. On 15 April 2010, Tata Motors had said that its global vehicle sales rose 39% to 101,712 units in March 2010 over March 2009. This includes sales of UK-based Jaguar and land Rover brands that rose 43% to 23,538 vehicles in March 2010 over March 2009.

Infrastructure developer Jaiprakash Associates jumped 6.22% to Rs 157.15 on reports its unit Jaypee Infratech is coming out with its initial public offer (IPO) on 29 April 2010.

Private sector lender ICICI Bank moved up 5.87% to Rs 975.75 on reports the bank has re-launched a special home loan plan to attract property buyers.

Hindustan Unilever (up 5.45% to Rs 238.8), Mahindra & Mahindra (up 3.56% to Rs 520.55), Larsen & Toubro (up 2.99% to Rs 1617.85), Tata Power Company (up 2.50% to Rs 1361.25) and Hindalco Industries (up 2% to Rs 178.3), were the other major Sensex gainer in that order.

India's largest steel maker by capacity Tata Steel declined the most in the week that went by. The stock corrected 6.62% to Rs 648.45. Some reports suggested that Tata Steel is close to aborting its plan to sell the Teesside unit of Corus as high raw material prices of iron ore and coal have made the unit unattractive for prospective buyers.

India's largest drug maker by market capitalisation Sun Pharmaceuticals Industries was the second biggest loser of the week. It fell 6.46% to Rs 1684.60.

India's largest copper maker by sales Sterlite Industries declined 5.11% to Rs 795.20. It was the third biggest Sensex loser last week.

India's largest software exporter by sales Tata Consultancy Services (TCS) declined 4.31% to Rs 779.8. Consolidated net profit as per Indian accounting standards rose 9.7% to Rs 2,001 crore on 1.17% rise in total revenue to Rs 7738 crore in Q4 March 2010 over Q3 December 2009.

India's third largest software exporter by sales Wipro fell 4.04% to Rs 692.95. Consolidated net profit under International Financial Reporting Standards jumped 21% Rs 1209 crore on 8% rise in total revenue to Rs 6983 crore in Q4 March 2010 over Q4 March 2009.

Wipro's board recommended a 2:3 bonus issue at the time of announcing the fourth quarter results. The board also recommended a final dividend of Rs 6 per share on the face value Rs 2 each.

ACC (down 3.23% to Rs 902.55), Bharti Airtel (down 2.18% to Rs 297.70), Infosys Technologies (down 2.07% to Rs 2728.10), Hero Honda Motor (down 1.87% to Rs 1883.65), and ONGC (down 1.37% to Rs 1017.30), were the other major Sensex losers in that order.