RBI effect: Sensex, Nifty break down

The Indian equity market finally broke down from its trading range. Market had opened on a flat note and remained in a tight range in the earlier part of the day. Post the RBI policy announcement the indices fell sharply. The RBI reduced the cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.5% to 4.25% of their net demand and time liabilities (NDTL) effective the fortnight beginning November 3, 2012. As result of this reduction in the CRR, around Rs175 bn of primary liquidity will be injected into the banking system. This was however, more on expected lines and the street would have been happy to see a rate cut. Technically, Nifty violated the neckline of Head and shoulder top after breach below 5630 with renewed selling pressure from financial. Nifty has currently retraced 38.2% of the recent up move from 5223 till 5801 which corresponds to 5580 and move below same could drag Nifty well below 5500 in the coming days. The interest rate sensitive stocks were under pressure. The BSE Banking and the Realty index were the top losers shedding ~2.2% each. Among the other major losers were BSE Consumer Durables index down 2.2% and BSE Capital Goods index fell 2%. Even the BSE Mid-Cap and the Small-Cap index lost 1% and 1.2% respectively. On the other hand, the BSE IT index was the top gainer up 0.5% and BSE Teck index gained 0.36%. Finally, the BSE Sensex closed at 18,430, down 204 points over the previous close. It had earlier touched a day's high of 18,718 and a day's low of 18,393. It opened at 18,642. The NSE Nifty ended at 5,597, down 67 points over the previous close. It earlier touched a day’s high of 5,689 and a day’s low of 5,589. It opened at 5,656. Infosys, TCS, Wipro, Maruti, HUL, Dr Reddys Lab, BHEL, Bharti Airtel, Cairn, Bajaj Auto, Ranbaxy were among the major gainers in BSE Sensex and Nifty. While, RIL, NTPC, ICICI Bank, Tata Steel, L&T, Hero MotoCorp, M&M, ITC, Bajaj Auto, Coal India, ONGC, Tata Power, Sun Pharma, HDFC Bank, Axis Bank, Tata Motors were among the major losers in Sensex and Nifty, The INDIA VIX on NSE was up 0.33% to end at 15.17. It hit a day’s high of 15.55 and a day’s low of 15.09. "As expected, the RBI reduced CRR by 25bps to 4.25% thereby injecting Rs175bn of primary liquidity into the banking system. The repo rate was left unchanged at 8% along expected lines. The CRR cut was in anticipation of a prospective tightening of liquidity conditions in coming months. After easing through H1 FY13, liquidity conditions tightened in October on account of a build-up in the Centre’s cash balances and seasonal increase in currency demand. WPI and core inflation has been stubborn in recent months. Persistence of non-food manufactured product inflation around 5.5% and retail inflation near 10% despite the sharp growth slowdown have been the key concerns. With RBI’s unwavering focus on managing inflation and inflation expectations, we assign a low probability to repo rate cut in December mid-quarter review. However, implementation of recent policy initiative, progress towards fiscal consolidation and a likely retracement of inflation are expected to provide significant room for monetary easing in Q4 FY13," says Amar Ambani, Head of Research IIFL. Other Corporate News Shares of KEC International Ltd slipped 11% at Rs 67 after its Net Sales for the quarter stands at Rs16.68bn as against Rs12.63bn in the corresponding quarter of the previous year. While shares of IRB Infrastructure surges 4% at Rs119, after the company's net profit stood at Rs1.21bn, while its net sales stood at Rs8.45bn. Shares of Maruti Suzuki Ltd was up 2% at Rs1386 after the company has posted a net profit of Rs. 2274.50 mn for the quarter ended September 30, 2012 as compared to Rs. 2404.50 mn for the quarter ended September 30, 2011. Globally, the Asian markets ended on a mixed note. The Nikkei index in Japan was down 1%, while the Hang Seng index in Hong Kong ended lower by 0.4% to close at 21428. While the Shanghai Composite index in China ended higher by 0.2% to close at 2026, the Kospi index in South Korea ended higher by 0.4% and the Taiwan index gained 1.2%. The European markets also started off the day with smart gains. The FTSE index in UK was up 0.6%, the DAX index in Germany was trading higher by 0.75% and the CAC index in France was up by 0.7%. The US stock markets were shut on account of Hurricane Sandy and will continue to remain closed today.