Markets fall for 5th day, close in red ahead of RBI policy

3:30 pm Indian markets closed in red ahead of RBI’s monetary policy review, which is scheduled for tomorrow, butDeutsche Bank is hopeful that the benchmark index will touch 22,000 points by December 2013, thanks to receding investor pessimism and a good monsoon.

While BSE Sensex closed 117 points lower at20579.35, closed Nifty down 41.45 points 6103.45.

Top Sensex losers were ITC (falls 3.9 percent), Sesa Sterlite (down 3.6 percent) and Tata Steel down 3.1 percent.

Banking stocks also fell on risk aversion ahead of the central bank’s policy review on Tuesday where it is widely expected to raise interest rates by 25 basis points, while US Federal Reserve holds its policy meeting on October 29-30.

The expiry of the October derivative contracts on October 31 could further add to the volatility, traders say.

Sensex flat ahead of RBI policy review, HUL gains

12:00 pm Indian markets are volatile ahead of RBI’s policy review meet tomorrow. Experts say markets have already priced in a 25 basis point rate hike.

“The view is that there will be a 25 bps hike in the repo rate and 25 bps cut in the MSF. So, it will be a non event. Now the only risk is if the RBI hikes repo rate by 50 bps and does not cut the MSF, then that is the only scenario in which the market will respond to the monetary policy,” said Pathik Gandotra, partner, Dron Capital Advisors in an interview with CNBC-TV18.

Since taking over as governor, Rajan has focused on reining in prices - he raised the repo rate by 25 basis points in his first policy on 20 September - despite little sign that the economy is likely to revive after hitting a decade-low growth of 5% in the year to March.

While the BSE Sensex was up34 points or 0.17 percent at 20717, the Nifty was up 0.05 percent at 6147.

Sensex in green on positive cues but rally not sustainable

9:30 am Indian equity markets are poised to hit new highs on hopes that the economy had bottomed out and growth would revive in the coming quarter on the back of a good monsoon and positive global cues, especially delayed tapering of stimulus by US Federal Reserve. However, analysts caution that buoyancy seen in the Indian market is purely due to abundant liquidity on back of tapering delay by Federal Reserve, but is not backed by strong fundamentals both locally and globally.

While the BSE Sensex today opened up just 60 points at at 20737,NSE Nifty opened at 6162, up 15 points.

The Indian rupee opened flat at 61.40 against the US dollar

Globally, positive earnings momentum continues on Wall Street with S&P 500 hitting a fresh record high of 1759 points buoyed by Amazon and Microsoft. For the week, the Dow rallied over a percent, but caution is likely to set in ahead of the FOMC.

Asian markets opened higher today with the Nikkei rallying a percent in early trade.

Overseas investors have pumped in more than Rs 12,100 crore ($1.97 billion) in the Indian equity market since the beginning of this month amid easing concerns over the US tapering.The total foreign investment in the stock market has thus reached Rs 85,336 crore ($15.6 billion) in 2013 so far, according to the latest data available with market regulator Sebi.

“Equity markets have been witnessing buoyant FII inflows not merely on the back of continued global liquidity as the US Fed appears to have postponed withdrawal of its monetary stimulus for now, but also on account of our receding external risks,” Angel Broking Economist Bhupali Gursale said.

“The latter can be mainly attributed to the anticipated moderation in our CAD as well as policy measures taken to attract capital in order to finance the deficit,” he added.

The market, whose benchmark Sensex closed at over one-weeklow of 20683.52 last Friday, is expected witness volatility inthe next few sessions as traders decide whether to roll overtheir positions in the futures & options (F&O) segment ascontracts expire this week, brokers said.

“F&O expiry is due on Thursday and thus volatility may beseen. Global cues, quarterly results and RBI’s monetary policywill be watched carefully for further market moves,” saidBonanza Portfolio Senior Vice President Rakesh Goyal.

[caption id=“attachment_1168089” align=“alignleft” width=“380”] If the Sensex is today nudging 21,000 - less than 1,000 points away from its all-time peaks in 2008 and 2010 - it is because market perceptions have changed. AFP[/caption]

The Bombay Stock Exchange (BSE) last week soared past the 21,000-point-mark for the first time in three years.The benchmark index’s record high is 21,206.77 points, hit in January 2008. The 30-scrip barometer hit a high of 21,039.42 points last week, for the first time since Nov 8, 2010.

Traders say that market participants have priced in a 0.25percent repo rate hike by the RBI on October 29 as inflationconcerns linger on. Further rollback of RBI’s forexstabilisation measures could also be on the cards.

Global brokerage firm HSBC said: “Despite the weak growthbackdrop, we expect that the RBI will further raise the policyrate by 25 bps on Tuesday to deliver on its hawkish promisesand, through this, help anchor inflation expectations.”

Even though the 30-share bluechip index briefly climbedto three-year high by surpassing a crucial 21,000 levelyesterday, it closed 199.37 points down last week – the firstloss in four weeks. Experts said this trend shows the cautiousstance adopted by the investors ahead of the event-heavy week.

The outcome of the Federal Open Market Committee (FOMC)two-day policy meeting on October 29-30 would dictate terms inthe global markets. Most experts rule out any announcement totaper the $85 billion a month bond purchase programme inthe meeting of the panel, which makes key decisions aboutinterest rates in the US.However, market participants would keep an eye on any hinton the timeline for the tapering, experts added.

The HSBC Manufacturing PMI numbers are expected onNovember 1, which would also impact the domestic market trend.

Among quarterly results that would be announced this weekinclude Maruti Suzuki (October 28), NTPC, Ranbaxy (October29), Bharti Airtel, DLF and Jindal Steel & Power wouldannounce their results on Wednesday (October 30). IDFC and DrReddy’s Laboratories on (October 31).

Speaking about Nifty, brokerage GEPL Capital said: “Thelevel of 6,100 continues to remain as a key support for theindex for the immediate term. On the higher side, it maybounce back till 6,190 to 6,200 range but may not be able tomove beyond 6,252.”

The NSE Nifty index closed at 6,144.90 on Friday.

Stocks in news

Hindustan Unilever shares were up 2.7 percent aftercompany reported better than expected 13% rise in net profit for the September quarter, driven by volumes and higher revenue from personal products.

SpiceJet is up half a percent. The airline is planning a gradual global expansion. Along with increasing frequencies on certain foreign routes, the airline is aiming to add two more global destinations, Dammam and Kuala Lumpur, by March next year.

The big result expected today will be Maruti Suzuki which is expected to be a weak quarter operationally with margins seen 140 bps lower sequentially due to a sharp increase in discounts, lower share of diesel vehicles and higher import costs. Despite rising volumes, revenues are seen flat owing to an adverse product mix. The stock is up 1 percent.

With inputs from PTI