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Tuesday, September 18, 2012

Swinging Sensex settles 78 points up


The wave of reforms sweeping over the weekend saw the indices take off to a glorious start. The Sensex and Nifty reached 14-month highs and extended its winning streak for over a week now. The gains were pared soon with FMCG and tech stocks being the victims. The RBI announced a reduction in CRR by 25bps. RBI also kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0%. Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0%, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0%. "After an unexpected 100bps SLR reduction during the June quarter review, the RBI once again surprised the market by cutting the CRR rate by 25bps to 4.5%. Although commercial bank’s borrowing from the central bank under the LAF window has been benign in recent months, the RBI may be anticipating some pressure on liquidity in the coming months due to the advance tax outflows and a seasonal uptick in credit growth. The repo rate has been left unchanged along expected lines. The RBI’s primary focus has remained on inflation containment. The WPI for August came in higher month-on-month at 7.55% and the CPI has been hovering around 10% over the past few months. Near term inflation outlook also remains perturbing as the recent upward revision in diesel prices and rationalization of LPG subsidy would exert upward pressure. We believe that the RBI is unlikely to consider rate cuts till December," says Amar Ambani, Head of Research, IIFL. Finally, the BSE Sensex ended at 18,587, up by 122 points or 0.67% over the previous close. It had earlier touched a day’s high of 18,715 and a day’s low of 18,480. It opened at 18,619. The NSE Nifty settled at 5610, up 32 points or 0.58% over the previous close. It touched a day’s low of 5,585 and a day’s high of 5,652. RIL, Wipro, ONGC, ICICI Bank, Tata Power, HDFC Bank, Bajaj Auto, L&T, Tata Motors, SBI, M&M, NTPC were among the major gainers in BSE Sensex and Nifty. While, Infosys, TCS, Wipro, Coal India, ITC, Sun Pharma, HUL, Dr Reddys Lab are among the major losers in Sensex and Nifty. The INDIA VIX on NSE shot up by 15.6% to end at 17.78. It hit a day’s high of 17.81 and a day’s low of 15.38. There is a fear that some roll back may happen. Reports indicate that the government may increase the number of subsidized LPG cylinders’ supply to ten from earlier six in a year. Last week, the government hiked the prices of diesel by a steep Rs 5.62 per litre and restricted the supply of subsidised cooking gas to 6 cylinders per household in a year. FDI in power exchanges, retail, media and aviation are among the steps in the right direction not to mention the tough stand of hiking diesel prices. Further more; to add to the positive triggers, RBI Governor did the needful to give extra momentum which was almost inline with market expectations. Market players were seen taking profit off the table post the announcement. However, markets managed to recover fairly well from their lows. Globally, not to forget the Fed’s stimulus announcement of course cheered world markets last week which were adding to the positive mood. ECB president Mario Draghi’s plan for unlimited, but conditional, bond purchases of troubled euro area countries brought in cheer as well. The Asian stocks touched highest in four months. MSCI's broadest index of Asia Pacific shares outside Japan was up 0.3%, while Tokyo markets were closed for a holiday. The Nikkei index Japan was up 1.8%, the Hang Seng index was slightly up 0.2% and the ASX 200 index in Australia was up 0.3%. On the other hand, the European stocks were pushing lower on Monday. The FTSE index in UK was down 0.3%, DAX index in Germany was down 0.2% and the CAC index in France slipped 0.6%.