RBI policy fails to cheer markets; Sensex ends flat

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Mumbai | Updated: April 7, 2015 5:03:45 PM

After flipping between positive and negative zones, the benchmark BSE Sensex today settled with a marginal rise of 12 points at 28,516.59...

SENSEX, bse sensex, sensex drops, RBI monetary policy review, RBI monetary policy, RBI rate cut, nse nifty, nifty, live sensex, sensex update, market today, RBI monetary policy 2015, RBI Policy Review, bse india, NSE Nifty, nse india, stock market today, share market today, sensex today, market news, business newsBSE Sensex rises 12.13 pts to end at 28,516.59; Nifty up 0.40 point to close at 8,660.30. (Reuters)

After flipping between positive and negative zones, the benchmark BSE Sensex today settled with a marginal rise of 12 points at 28,516.59, after RBI keeping key policy rate unchanged failed to cheer investors.

The 30-share Sensex opened firm and rose over 105 points by rallying to 28,641.08 in early trade. However, the index pared gains and fell to the day’s low of 28,274.36 after the RBI kept policy rate unchanged.

Reserve Bank’s move was largely in line with investor expectations, but selling in interest-sensitive banking and realty stocks, wiped-off session’s initial gains, brokers said.

Market Outlook by Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services
As expected RBI has maintained its status quo. RBI is interested seeing banks to start sharing benefit of 50bps cut in repo rate earlier (lower lending rate). And having seen that RBI afterward cut will depend on forthcoming data, US fed decision and improvement of business environment (as per initiatives mentioned in union budget). Hence as per the first requirement, Q4 performance of banks will be very important in terms of NPA restructuring. Post which we can expect banks to lower the lending rate.

However, buying in blue-chip stocks at the fag-end helped the BSE Sensex to finish with a marginal rise of 12.13 points or 0.04 per cent at 28,516.59.

On similar lines, the 50-share NSE Nifty finished 0.40 point higher, at 8,660.30 after moving between 8,693.60 and 8,586.85 during the day.

In its monetary policy, RBI left the short-term lending rate or repo rate unchanged at 7.5 per cent and the cash reserve ratio static at 4 per cent. The statutory liquidity ratio (SLR) has also been retained at 21.5 per cent.

The central bank also projected growth rate in 2015-16 at 7.8 per cent, up from 7.5 per cent in 2014-15.

Of 30 Sensex stocks, 16 ended higher and 13 finished lower, while ITC ended steady.

Among banking stocks, Axis Bank at 1.69 per cent was the biggest loser followed by ICICI Bank at 1.20 per cent and SBI 0.97 per cent.

Sectorally, realty index topped the worst performer list by falling 1.62 per cent, followed by bankex shedding 0.71 per cent and healthcare losing 0.19 per cent.

BSE Metal index gained the most by rising 2.20 per cent as Jindal Steel, Tata Steel, SAIL, JSW Steel and Sesa Sterlite among others ended in the green.

Power, consumer durables and FMCG indices were also in the green.

Global cues were conducive as Asian bourses ended higher and European markets were also in better shape in early trades today.

Meanwhile, Foreign portfolio investors (FPIs) bought shares worth Rs 936.81 crore yesterday while Domestic institutional investors (DIIs) sold shares worth Rs 170.03 crore as per provisional data.

Market Wrap Up by Alex Mathews, Head Research, Geojit BNP Paribas Financial Services
Tracking the global cues, the domestic markets opened with a positive note but slipped into the negative territory after the RBI policy meet, but later recovered due to selective buying. As of the first policy review in the financial year, the central bank kept its key interest rates unchanged. The repo rate remained at 7.50% whereas the reverse repo got adjusted at 6.5%. The cash reserve ratio stood at 4%.
Nifty today closed with a flat note at 8660.  The market breadth stood positive as there were seen 1652 stocks advancing against 1094 stocks declining. The Nifty volatility index, India VIX stood at 14.2500 down around 2.21%.  The mid-cap and small-cap sector were seen outperforming the broader markets, ended up around 0.74% and 1.17% respectively.
Barring the Realty and Banking sector which closed down around 1.62% and 0.71% respectively, all other sectors ended in green. The major sectorial gainer for the day was Metal which closed higher around 2.20%.
In the stocks’ front, the major gainers were Tata Steel and SSLT which closed up around 5.12% and 3.55% respectively whereas the losers were IDFC and Axis Bank which closed down around 2.11% and 1.76% respectively.
The FIIs were buyers in the cash markets segment, bought shares worth Rs 936.81 crore on Thursday, 06 April 2015. On the other hand the DIIs were net sellers on 06 April 2014, sold shares worth Rs 170.03 crore as per the provisional data from the stock exchanges.
The European markets were trading higher on the speculation that the Federal Reserve may keep the interest rates lower for a longer period. In the economic front, the UK services growth accelerated to a seven month high in March.

(Also Read: RBI monetary policy review: Full report)

Some investors had hoped the central bank would lower the CRR to spur more banks to lend, but RBI Governor Raghuram Rajan said the sector should have enough liquidity to be able to lower their lending rates.

“Stock Market was expecting a CRR cut or something on those lines which could have given some direction and helped overall liquidity in the system,” said Pankaj Murarka, head of equities at Axis Mutual Fund.

The NSE share index fell as much as 0.8 percent, led by a decline in the NSE bank sub-index, which fell as much as 1.4 percent.

The benchmark  index was down 0.6 percent.

The benchmark 10-year bond yield rose 6 basis points (bps) to 7.78 percent, while the partially convertible rupee fell to as much as 62.4050 compared with Monday’s close of 62.18/19 per dollar.

Some analysts said any future rate cuts would likely depend on inflation data, given unseasonal rains last month have pushed up winter crop prices.

The RBI embarked on an easing cycle in January to bolster economic growth. So far it has cut rates twice this year, by a total 50 basis points. Both times the reductions took place outside of the regular policy reviews.

In the overnight indexed swap market, the one-year rate  rose 7 basis points to 7.52 percent.

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