Markets turn voltile post RBI hike

Chandrakant / 25 Oct 2011

Indian stock markets turn extremely volatile post RBI's 25 bps hike in the repo rate to 8.5%.

The markets have turned extremely volatile after the announcement of the RBI policy. The RBI has hiked the repo rate – at which banks borrow money from RBI – by 25 basis points to 8.5%, along expected lines, while the reverse repo rate and cash reserve ratio have remained unchanged.

Going forward, the central bank has said that the likelihood of rate action in the December policy is relatively low. However, the negative point for the banks was the deregulation of saving rates – the Bank Nifty fell 2%. The RBI has clarified though, that each bank will offer a uniform rate on savings up to Rs 1 lakh.

Benchmark Indices
Index Rate % Change
Hang Seng 18,823.81 0.28
Nikkei 8,762.31 -0.92
Shanghai 2,412.58 1.78
SENSEX 16958.73 0.11
NIFTY 5102.6 0.08

Meanwhile, all other Asian markets are also trading on a mixed and volatile note amidst speculation over the efforts taken by the European leaders to contain the debt crisis there.

Back home, in the financial space, HDFC Bank plunged 4 per cent. SBI, PNB and Axis Bank fell 2-2.8 per cent. ICICI Bank declined 1.4 per cent. Other interest rate sensitive sectors have also dropped with the realty and auto indices down 0.6 per cent and 0.1 per cent respectively.

Among others, ONGC, Coal India, BHEL, Bajaj Auto and Kotak Mahindra Bank were down 0.5-1 per cent. Meanwhile, IT shares have held on to gains. Infosys has advanced 2 per cent to Rs 2,826. Larsen & Toubro has finally recovered from its losses and has gained 1.6 per cent to Rs 1,315. Sterlite, Sun Pharma, Hindalco, Maruti Suzuki and Bharti Airtel have moved up 1-2 per cent each.

In other stocks, VIP Industries has plunged 6 per cent to Rs 840 after reporting 13 per cent year-on-year (y-o-y) drop in net profit at Rs 10.90 crore for the quarter ended September 2011, compared with Rs 12.60 crore in the corresponding quarter of previous fiscal. However, net sales grew 16 per cent to Rs 174 crore on y-o-y basis.

Container Corporation's net profit dipped 15 per cent to Rs 175 cr for the quarter ended September 2011. It was Rs 206 crore in the same quarter a year ago. The stock is down 1.4 per cent at Rs 970.

The market breadth, indicating the overall health of the market, is negative. On BSE, 1445 shares fell and 933 shares rose. A total of 101 shares remained unchanged.

In conclusion, we expect the markets to be volatile for the remainder of the day and don’t expect much downside as much of the impact of the 25 bps rate hike has been already discounted.

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