A close below 7,400 will push Nifty lower
We had mentioned in Monday’s closing report that Nifty, Sensex might head higher subject to dips and that Nifty has to stay above 7,500 for the rally to continue. The major indices of the Indian equity markets suffered a sharp correction of over 1% over Monday’s close and went below 7,500. The trends of the major indices in the course of Tuesday’s trading are given in the table below:
Today, the RBI, in its last bi-monthly credit policy review on Tuesday for FY2015-16 has kept repo, reverse repo, cash reserve ratio (CRR) and bank rate unchanged. With repo rate remaining at 6.75%, the reverse repo rate under the liquidity adjustment facility (LAF) will remain unchanged at 5.75%, and the marginal standing facility (MSF) rate and the bank rate at 7.75%. In a statement, RBI Governor Dr Raghuram Rajan said, "The Reserve Bank continues to be accommodative even as it leaves the policy rate unchanged in this review, while awaiting further data on the development of inflation. Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5% by the end of 2016-17."
"The current momentum of growth is reasonable, though below what should be expected over the medium term. Underlying growth drivers need to be rekindled to place the economy durably on a higher growth trajectory. The revival of private investment, in particular, has a crucial role, especially as the climate for business improves and fiscal policy continues to consolidate. The Indian economy is currently being viewed as a beacon of stability because of the steady disinflation, a modest current account deficit and commitment to fiscal rectitude. This needs to be maintained so that the foundations of stable and sustainable growth are strengthened," he added.
Initially, the bellwether indices of the Indian equity markets opened on a firm note as investors anticipated an easing of key lending rates. However, sentiments were soon subdued following the RBI’s decision to keep the repo and reverse repo rates unchanged in the current fiscal's final bi-monthly monetary policy review. Ignoring the clamour for an easing of monetary policy as an instrument to boost the fledgling economic growth, India's central bank maintained its short-term lending rates. RBI's decision and flat Asian markets dented sentiments. The S&P BSE market breadth favoured the bears -- with 1,332 declines and 1,099 advances.
The industrial output index for India's eight core industries registered a rise in December 2015, pushed up by higher coal, refinery products, fertilizers, cement and electricity output. The index representing major infrastructure sectors had recorded a fall in November 2015. The index showed a rise of 0.9% in December 2015 on a month-on-month basis, compared to the 1.3% decline in November, official data showed on Monday. The core industries grew 3.2% in October last year. However the select factory output index for December is less than the growth of 3.2% achieved during the corresponding month in 2014, a commerce ministry release said. This index comprises 38% of the total weightage of items included in the Index of Industrial Production (IIP). Its cumulative growth from April to December 2015-16 stood at 1.9%, as compared to 5.7% during the corresponding period of 2014-15. Out of the eight core industries, fertilizers and coal reported healthy output numbers. However, production of oil, natural gas, and steel dwindled in the period under review.
Coal mining, with a 4.38% weightage, increased by 6.1%. The sub-index for natural gas output, with a weightage of 1.71%, slipped by 6.1% in the month under consideration. The fertilisers manufacturing with a weightage of only 1.25% rose exponentially by 13.1%. Steel declined by 4.4% in December 2015.
The US stocks pared early losses to end mixed on Monday, as investors assessed a batch of generally negative economic reports. The Dow Jones Industrial Average fell 17.12 points, or 0.10%, to 16,449.18. The S&P 500 edged down 0.86 point, or 0.04%, to 1,939.38. The Nasdaq Composite Index rose 6.41 points, or 0.14%, to 4,620.37. The US personal income increased $42.5 billion, or 0.3%, and disposable personal income increased $37.8 billion, or 0.3%, in December, the Commerce Department said on Monday. In a separate report, the department announced that the US construction spending during December 2015 was estimated at a seasonally-adjusted annual rate of $1,116.6 billion, 0.1% above the revised November reading but missing market consensus of a 0.6% gain. Meanwhile, the US January purchasing managers' index (PMI) registered 48.2%, an increase of 0.2 percentage point from the seasonally-adjusted December reading, the Institute for Supply Management (ISM) said on Monday. A reading above 50 indicates the sector is generally expanding, while a reading below that level indicates contraction. The weaker-than-expected economic data raised expectations that the US Federal Reserve would go slow on future interest rate hikes.
The top gainers and top losers of the major indices are given in the table below:
The closing values of the major Asian indices are given in the table below: