Markets Gain 2% On Renewed Rate Cut Hopes

The markets gained today on hopes of a rate cut and liquidity easing. Investors bought more equities, showing their strong will towards a much-needed rate cut. The rate sensitive sector was up on the anticipation of the same. However, experts have clearly said that the RBI would probably not go in for a rate cut in its fiscal policy announcement.

The RBI's first quarter monetary policy review due tomorrow is the topic of hot discussion. The current WPI inflation figure of over 7% gives scant comfort to the RBI for it to slash the rates. Besides, the monsoon story over the last two months has been quite feeble, and hence, there could be upward pressure on the inflation numbers that will be announced next month. We, at DSIJ, see less scope for the RBI to cut the rates.

The European indices are trading up on strong hopes of a stimulus from the ECB. FTSE, CAC and DAX were all trading in gains of over 0.5% at the time of writing this update. Earlier in the day, the Asian indices closed mostly in gains. Dow Jones Futures is currently trading 26 points down at 130007.

The bulls were so dominant that none of the sectoral indices were in losses by closing. In fact, all the sectors managed to post at least 1% intraday returns. The Power index was the top gainer, surging by 3.58% due to the rise in the stocks of NTPC, Tata Power, Power Grid, etc despite the massive power outage in north India today. Other sectors like Realty, Auto and Bankex were up on hopes of a rate cut.

Among the Sensex stocks, SBI was the top gainer, up by 4.63%. Tata Motors was also on the buyers' list. Tata Power, which said last week that it will start scouting for projects outside India, also gained over 4%. The shares of ICICI Bank, BHEL, L&T and GAIL India rose sharply by 3% each.

There were only 3 losers by the end of the day, all of them flat in trades. ONGC lost 0.3%, while HUL and Wipro were almost flat with negative 0.01-0.02% returns.

The debt-ridden renewable energy company, Suzlon Energy, has informed the stock exchange that it has redeemed FCCBs worth USD 360 million. The shares of the company were up over 11% by closing. IRB Infra was also on the buyers' radar, and the stock was up by 10%. Bharat Electronics, on the other hand, was down by 7% after the company reported a huge decline in profits for the Jun 2012 quarter.

The shares of Power Grid Corporation surged to an all-time high of Rs 118 today.

The advance-decline ratio on the BSE remained highly positive for the day. A total of 51% stocks advanced, 44% stocks declined and 5% remained unchanged.

Ahead tomorrow, the eyes of the markets are set on the RBI’s monetary policy review. Any unexpected action will drag the markets down. Hence, we advise investors to take a cautious approach in trades tomorrow.