Money on the markets

RBI Policy Review

Reuters India brings to you breaking news on the Reserve Bank of India’s quarterly policy review.

Sensex remains choppy despite rate cut

The BSE Sensex closed 0.74 percent lower on Tuesday, tracking weak Asian markets and a downward bias of growth forecast by the RBI.

The benchmark closed 81.39 points lower at 10,898.11, while the Nifty ended 0.35 percent down at 3,365.30. The Sensex fall was led by ICICI Bank, L&T, Infosys and SBI.

The Reserve Bank of India (RBI) in its latest policy review slashed its repo and reverse repo rates by 25 basis points each, but left the cash reserve ratio unchanged at 5.0 percent.

The central bank has moderated its growth forecast to 6 percent for the year 2009/10 from 6.5-6.7 percent.

On the sectoral front, the rate cuts could not help the banking stocks much, and the banking index lost nearly 2.8 percent. This was followed by the BSE Auto Index which was down 2.5 percent. However, the BSE Realty Index bucked the trend and gained 2.2 percent.

On the global front, Asian markets remained weak after news of mounting bad loans of Bank of America (which has received $45 billion of taxpayers’ money) raised further concerns of a global financial system.

The RBI, in its latest endeavour to shore-up growth, has brought down both its key policy rates, but will this force commercial banks to reduce lending and deposit rates that in turn can boost loan growth? Do you see another round of rate cuts in the offing?

Sensex closes weak; RBI policy eyed

The Sensex closed 0.40 percent lower on Monday, amid mixed Asian markets and profit booking by investors.

The benchmark closed 43.59 points lower at 10,979.50, while the Nifty ended 0.22 percent down at 3,377.10.

The benchmark’s fall was led by ICICI Bank, HDFC, ITC and NTPC.

On the sectoral front, the BSE Banking Index led the decline, losing nearly 1 percent. This was followed by the BSE FMCG Index which was down 0.75 percent. However, the BSE Metals Index bucked the trend and gained 2.5 percent.

On the global front, Asian markets were choppy and the effect was also seen on the Sensex. Signs of recovery in the U.S. economy have kept sentiments buoyed, mainly due to positive results from two big U.S. firms Citigroup and GE.

With the RBI’s annual credit policy for 2009-10 due tomorrow, do you think a favourable measure will help the Sensex register gains?

Inflation down but reforms needed to boost demand

The latest inflation data for early March may please authorities ahead of national elections. Political leaders will trumpet the fact that the government’s efforts have yielded results and the demon of inflation has finally been tamed.

But the early March number throws up some serious concerns. It signifies that the Indian economy has entered a phase of deflation for a temporary period. Demand in the economy is extremely subdued and fresh efforts are needed to restore confidence.

Farm crop output is likely to be robust and this may help in moderating prices but the problems with regards to supply bottlenecks have hardly been addressed. Ports, roads and reforms in agriculture must therefore be the focus of the new government which assumes power after the April-May elections.  Past experience has shown that a tardy monsoon can upset calculations overnight.

There is very little time to lose and massive reforms across all sectors are needed to get the economy moving again. Much will depend on the government which is voted in after the elections.

Such low level of wholesale price inflation, the most widely watched inflation measure in India, throws up another worry. Real interest rates are still high and authorities must nudge banks to lower them to push demand and restore confidence in the economy.

The central bank and the government have taken timely action but now it is up to the commercial banks and firms to take the benefits of the stimulus packages to the consumers.

There is still room for more stimulus measures and the new government will have to immediately hit the ground running to sustain a 6-7 percent growth and protect jobs in a country which hardly has any social security.

Sensex gains on bargain hunting

The BSE Sensex closed 1.56 percent higher on Friday as investors saw an opportunity in the battered market that had plunged to its lowest in three years in the previous session.

The benchmark closed at 8352.82, supported by index heavyweights Reliance Industries (up 1.8percent), NTPC (up 2.2 percent) and Bharti Airtel (up 2.1 percent).

The BSE IT Index remained the frontrunner, closing 3.05 percent higher on the recent slide in the rupee. Shares in Satyam Computer gained 19.94 percent after the fraud-hit outsourcer won regulatory approval to sell a majority stake in itself. Wipro and Infosys were up around 3 percent each.

Selling pressure was seen in Maruti Suzuki, HLL and Ranbaxy, which were down in the range of 2-3 percent.

The Sensex remained volatile for most part of the trade but gained momentum on gains in European markets.

Strong voices came out this morning and spoke about the breadth in the Indian economy, which added to investor sentiments. A senior RBI official said there were no signs of financial crisis in India, while the chief economic adviser said India would be able to meet its fiscal responsibility targets.

Government data released today showed infrastructure sector output grew 1.4 percent in January from a year earlier, below an unrevised 2.3 percent in December.

Tax saving with safety locked in

Some of the best advice often comes from the most unlikely of sources.

Years back, while on a trip to Jaipur, I had run into a rather energetic man who insisted on jumping the queue at the post office. When requests failed, I asked him why he was in a hurry.

“I have a savings account here,” he said proudly in Hindi, clutching a dog-eared booklet with currency notes tucked in. Ram Prasad, the 42-year-old cycle rickshaw driver had his way and left flashing his stained teeth.

Outside, he offered me a discounted tour of the city, with unsolicited advice on why I should park my funds in the post office. The stock market was hot that year and I brushed aside his guidance.

I bumped into him again last year outside the Pink City railway station. He showed me the new auto rickshaw he had bought with years of intelligent investing. Ram Prasad, I realised, had been a winner all these years. The market had gone into a tailspin, eroding millions of rupees of investor money, within months of the global financial crisis unraveling.

Reading the signposts is a must and interpreting them correctly is what can make or break. Singed by the financial crisis and corporate misadventures, small investors scrambled for safe yet decent returns. Suddenly, they had found the silver lining in bank fixed deposits (FDs) and government-backed saving schemes.

Coincidentally, the freeze of credit markets in October has forced banks and corporates to raise money at high rates. Bane for one could be a boon for another. Amid gloomy days, small investors now have a bounty of options to park their hard earned savings in debt offering as high as 10.5 percent.

Sensex ends flat after seesaw trade

The benchmark index seesawed all through the day and closed 20 points lower at 9015, pulled down by banks that slipped on concerns about their profit margins. The Sensex had dropped below the 9,000 mark in early trade.

Index heavyweight Reliance Industries gained 2.1 percent while Bharti Airtel was up 1.3 percent.

Realty stocks recovered well after weakness in early morning trade. The real estate index ended with gains of 3.18 percent. Shares in DLF, India’s top listed realty firm, gained over 7 percent as it ended as the top Sensex gainer.

The Bankex shed over 2 percent as banking stocks struggled. Shares of top private bank ICICI ended with losses of 4.3 percent.

Shares in Satyam ended 3.2 percent lower at 48.5 rupees with volumes of over 28 million shares on the BSE and the NSE.

The markets did not take any cue from RBI governor Duvvuri Subbarao’s comments that there was room to cut interest rates. He however was unsure when it could be done.

So far it appears to have been a bad week for the markets, with the benchmark having closed in the negative in all three sessions. The question now is will the downtrend continue or will we bounce back tomorrow?

Stimulus hopes boost investor sentiments

The BSE Sensex ended on a strong note on Monday, extending gains to more than 3 percent on hopes of fresh economic stimulus measures and another round of rate cuts by the Reserve Bank of India (RBI).

Gains were led by heavyweights like Reliance Industries, which was up 3.3 percent; ICICI Bank, which rose 5.1 percent, and State Bank of India which added 2.6 percent.

Amongst sectors, the Metals Index topped the charts, gaining over 4 percent mainly on a surge in steel makers. Bhushan Steel jumped 16.98 pct while Tata Steel and Welspun Gujarat rose 7.2 pct and 7.3 pct respectively.

The Oil & Gas Index gained over 3 percent, helped mainly by a rise in Reliance Industries, which was up 3.3 pct at 1389.05, and ONGC which was up 5.95 percent at 721.6 rupees.

Among individual stocks, Satyam continued moving south, closing 2.7 percent lower at 46.1 rupees. Its chairman today announced that the board would decide on a long-term action plan by next week, including a possible sale of the company.

Shares of Piramal Healthcare, which surged 25 percent in early trade on reports of a likely acquisition by GlaxoSmithKline and Sanofi Aventis, ended 1 percent lower at 192.55 rupees as the current valuation does not convince the company for a sell-out.

On the global front, equities were weaker in Europe and Japan, but emerging markets were putting in a fifth consecutive day of gains, reflecting positive investor sentiments. Caution remained over the contents of both the U.S. stimulus package and a delayed plan to rescue the U.S. banking system.

Sensex snaps two-day rise

The benchmark index shrugged off lower-than-expected inflation figures and fell 1.21 percent on Thursday, as a slump in domestic demand and fresh concerns over the U.S. economy took a toll on investor sentiment.

The Sensex closed 110.97 points down at 9,090.88, snapping a two-day rise. Losses were led by Reliance Industries, which fell 1.6 percent to 1286.75, and HDFC which dropped 3.6 percent.

Many banks fell as talks of more rate cuts by the RBI were seen as hurting profit margins. Top lender SBI shed 0.3 percent, HDFC Bank fell 1.4 percent, while ICICI Bank reversed early losses to end 0.4 percent up.

The Autos Index saw most of the selling pressure as it ended 1.98 percent down. Many automobile companies are facing falling sales as consumers are now spending less. TVS Motor, Tata Motors, Maruti Suzuki, Mahindra & Mahindra were down in the range 2 percent to 5 percent. Tata Motors slipped 2.8 pct, after falling as much as 5.3 percent during trade, on reports that payments to vendors would be delayed.

Embattled outsourcer Satyam Computer Services continued its fall, closing down 7.6 pct at 46.25 rupees. The scrip has registered drops this week despite positive news. After market hours, the new Satyam board announced that A.S. Murthy would be the new CEO.

Shipping firms however bucked the trend, picking up steam on signs of revival in demand for freight for commodities. SCI climbed 0.7 percent and Mercator Lines jumped 23 percent.

Markets are likely to see more pressure in the coming days as the global slowdown hits demand for Indian goods. Plan panel deputy chairman Montek Singh Ahluwalia today said there was need for steps to help garment exporters who have been hit by the downturn. Job losses in this sector, according to the garment exporters lobby, is estimated to touch 1.5 million by March-end. Do you think relief measures for this sector and another round of rate cuts by the Reserve Bank of India (RBI), which is being speculated, will help the index cap its losses?

Sensex rallies despite RBI decision

The BSE Sensex shrugged off the RBI decision to keep rates steady and closed 3.8 percent higher as gains in global markets triggered short covering ahead of the expiry of monthly derivatives.

In today’s policy review, the Reserve Bank left its lending rate steady at 5.5 percent and its reverse repo rate unchanged at 4.0 percent at its policy review on Tuesday. It has also kept the cash reserve ratio unchanged at 5.00 percent.

Gains were led by Reliance Industries, Infosys Technologies, NTPC, Airtel and SBI. The benchmark indices are trading higher, as buying is seen in metals, power, IT, banking and realty stocks. Majority of the buying today was seen from domestic funds while FII’s remained net sellers, dumping $85.3 million shares.

The metal index outperformed other indices, surging 5.55 percent. Jindal Steel, Sterlite Industries and Hindustan Zinc went up 9-12.5 percent. JSW Steel, Tata Steel and SAIL were up 3-4 percent.

There was some cheer for Satyam shareholders as the fraud-scarred firm jumped more than 28 percent during trade after Larsen & Toubro said it may raise its stake in the company beyond 12 percent. The stock closed up 21.4 pct at 47.15 rupees. L&T closed down 0.4 percent at 638.2 rupees.

Telenor said it will fund its investment in India’s Unitech Wireless, part of India property developer Unitech Ltd with cash flow and new debt. Unitech closed up 1.1 percent at 27.25 rupees.

Today’s Sensex climb was its best one-day rise in 7 weeks. A Reuters poll of analysts has shown that the central bank is expected to cut its key short-term interest rates in the next three months to fuel the slowing economy and provide liquidity to banks. Do you think today’s RBI decision will affect investor sentiment in the days to come?