Markets Shake Off Rate Cut Downer, Close Positive

The Indian equity markets saw a sharp recovery after the RBI decided to maintain the key rates as is. The BSE Sensex was up 92 points or 0.5% to 17,236. The 50-share Nifty was also up 29 points to 5229.

As we saw earlier, the RBI kept the Repo and CRR rates unchanged at 8% and 4.75% respectively in today’s Apr-Jun 2012 quarter review. This was largely in line with D-Streets expectations. Surprisingly though, the apex bank slashed the Statutory Liquidity Ratio (SLR) by 100 basis points to 23%.

Before the announcement, the markets has rallied expectations of a rate cut. Yesterday, the RBI has clearly said that the inflation is currently the focus area. Further, it has revised the GDP growth outlook downward to 6.5% against the earlier estimation of 7.3%. The baseline projection for inflation has been revised upward to 7% from the earlier 6.5% for March 2013.

Though the RBI’s stance had a potential to bring down the markets, there was a surprising upward momentum in Indian equities. The bank's next mid-quarter meet is scheduled for Sept 17, 2012. Now investors will keenly watch the IIP, PMI and inflation numbers in order to judge the economic health and growth of the nation.

Meanwhile, the Northern grid has failed again, causing the second major blackout in a day's time. The situation has arisen due to the overdrawing of power by the northern states due to heavy demand from the agricultural sector.

On the sectoral indices front, Power, Bankex and CD closed the day negative. Oil & Gas was the top gainer, up 2.1% by closing. Realty was also up 1.25% and Metals and PSU saw over 0.7% each.

Among the Sensex stocks, ONGC was up 3.3% and was the top gainer. Sterlite too was up 2.6%. Auto stocks like Tata Motors and Maruti Suzuki registered gains, but Hero and Bajaj were both down. The shares of RIL gained 1.8% today. IT giants Wipro, Infy and TCS also finished in the green.

In the banking space, both HDFC and HDFC Bank were gainers while SBI and ICICI Bank saw losses. The shares of NTPC lost today on news that the company has shut some of its units due to the power blackout in north India.

Of the other shares, Titan Industries posted muted growth in its net profits, due to which the stock lost 4% today. IPCA Laboratories gained after its Jun quarter results announcement. The company reported a 20% jump in its topline, a nearly 500 bps rise in the EBITDA margins. Its net profit was down 30%, mainly due to forex losses.

The advance-decline ratio on the BSE remained positive for today. A total of 48% of stocks advanced, 45% stocks declined and 5% remained unchanged.

The market has made a positive move, ignoring the RBI policy. They may see some further gains in this week as the three large central banks will have their monetary policy review. The global markets have surged on the same.