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It’s All about Expectations

The pace of the upsurge in stock prices has confounded almost everyone. Most people believe that...

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Tuesday’s Closing Report: All eyes on the Fed

The Indian market ended its two-day winning streak today amid a highly volatile session. The Reserve Bank of India's (RBI) policy announcement weighed down realty and oil & gas stocks resulting in the market paring gains clocked earlier in the session and closing flat with a negative bias.

The market opened on a positive note this morning, riding on the gains accrued yesterday, even though the RBI's policy announcement played on investors' minds. Nervousness led the indices into negative terrain on quite a few occasions. Rate-sensitive sectors like realty, banking and capital goods felt some selling pressure soon after the RBI announcement. With the hike in short-term and borrowing rates in line with market expectations, the market once again stepped into the green.

Volatility was the highlight of the day as the indices continued to swing both ways. Finally the market ended almost flat with a negative bias. All eyes are now glued to the outcome of the US Federal Reserve's "quantitative easing" announcement.

The Sensex ended 9.94 points (0.05%) down at 20,345, after swinging between a high-low of 20,418 and 20,281 respectively. The Nifty shed 1.45 points (0.02%) to settle at 6,119. The index touched an intraday high of 6,138 and a low of 6,094 during trade today.

The losers outnumbered the gainers today. The Sensex had 17 declining stocks against 13 gainers. The Nifty ended with 26 stocks in the red, 23 stocks ended lower and one stock remained unchanged. The broader indices, however, were unscathed and ended in the green. The BSE Mid-cap index gained 0.45% and the BSE Small-cap index added 0.09%.

The top Sensex performers were ACC (up 4.20%), Larsen & Toubro (up 2.53%), Wipro (up 2.49%), Tata Steel (up 0.94%) and ITC (up 0.90%). The losers were led by DLF (down 3.28%), Cipla (down 1.78%), RIL (down 1.72%), Bharti Airtel (down 1.53%) and Tata Motors (down 1.41%).

The sectoral gainers included BSE Consumer Durables (up 1.64%), BSE Capital Goods (up 1.42%) and BSE IT (up 0.62%). The laggards in the sectoral space were BSE Realty (down 2.58%), BSE Oil & Gas (down 0.80%) and BSE Auto (down 0.53%).

The RBI today hiked its key short-term lending and borrowing rates by 25 basis points each with immediate effect to rein in inflation, a move that could increase banks' commercial lending rates.

Accordingly, the short-term lending rate or (repo rate) stands at 6.25% and the borrowing rate (reverse repo) at 5.25%.
 
However, the RBI has left the cash reserve ratio or bank rate, which is the amount of cash that banks have to park with the central bank to maintain prudential norms, unchanged at 6%.

Markets in Asia closed mixed as central banks in India and Australia hiked interest rates, making investors anxious about outcomes of the meetings of the US and Japanese central banks. Markets were also eyeing the outcome of the US mid-term elections, due to take place later today.

The Hang Seng was up 0.08%, Nikkei 225 added 0.06%, Straits Times surged 0.41% and Seoul Composite gained 0.17%. On the other hand, the Shanghai Composite lost 0.28%, the Jakarta Composite was down 0.54%, KLSE Composite fell 0.20%, and Taiwan Weighted shed 0.42% in trade today.

Amid sharp criticism of microfinance institutions (MFIs) on using coercive methods for loan recovery, the Reserve Bank of India (RBI) today said that its sub-committee will submit a report on the issue, as well as their interest rate practices, by January-end.

The sub-committee, headed by YH Malegam, is to make recommendations relating to regulation of microfinance activities of non-banking financial companies (NBFCs), especially with regard to issues impinging on borrowers' interests.

The US market closed steady on Monday, awaiting the results of the mid-term elections and the Federal Open Market Committee announcement, due on Wednesday. It is widely believed that the Fed will announce plans to buy government securities worth $500 billion in a bid to enhance growth and curb unemployment. The Dow closed 6.13 points (0.06%) higher at 11,124. The S&P 500 added 1.12 points (0.09%) to 1,184. The Nasdaq shed 2.57 points (0.10%) to 2,504.

Foreign institutional investors were net buyers of stocks worth Rs712 crore on Monday. Domestic institutional investors were net sellers of equities worth Rs71 crore on the same day.

Hinduja Group flagship firm Ashok Leyland (down 0.20%) today launched 10 models of tippers and tractor trailers on the new U-truck platform.

The vehicles, under the 16-49 tonne category, would be available for pan-India sale in a phased manner over the next six weeks. In the next 12 months, the company plans to launch 15 more models in the domestic market.

State-owned exploration and production major Oil and Natural Gas Corporation plans to invest over $10 billion in bringing to production gas discoveries off the east coast, its director (Exploration) DK Pande said today.

ONGC is aiming to develop finds in the Krishna Godavari basin through four different projects, he said on the sidelines of the 'Petrotech-2010' oil and gas conference in New Delhi.

"We are targeting 25-30 million standard cubic meters per day of natural gas production by 2014-15," he said.

ABG Shipyard (up 0.45%) has bagged an export order worth Rs2,000 crore for construction of two jack-up rigs from Drilling and Offshore Pte. With this, the order book of the company stands increased to approximately Rs14,500 crore from over Rs12,500 crore at present.

The two rigs will have the capacity of 350 ft water depth and a drilling depth capacity of 30,000 ft. These rigs need to be designed for year round Gulf of Mexico and 50 year return period North Sea environment in accordance with the American Bureau of Shipping assessment criteria.
 

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