Mkt ignores RBI's non-action; ends in green, banks rebound

Indian equity markets ignored the Reserve Bank of India’s decision to hold interest rates and ended in the green today as hopes of the bank bill being passed in Parliament outweighed the negative sentiment post the RBI announcement of keeping key rates unchanged.

While the Sensex closed 0.63 percent higher at 19364, the Nifty closed up 0.66 percent at 5896 levels.

In an interview to CNBC-TV18, Nilesh Shah of Axis Direct Shah says that despite no rate cut by the RBI, the market is optimistic of rate cut in January, and that will drive the debt and the equity markets.

The RBI kept repo rate and reverse repo unchanged at at 8% and 7%, respectively. Cash reserve ratio (CRR) too remained at 4.25%. The Sensex and Nifty went into the negative territory post the announcement but turned marginally positive after bouncing back from lows. The rupee followed equities by giving up pre-policy gains to trade flat post policy.

“The angst about not doing the rate cut in December and probably promising it in first quarter of next year, is something which market is willing to live by,” Shah said.

The BSE Bankex Index recovered from day’s low after Finance Minister P Chidambaram said that the government will not push for the futures contract clause which was the bone of contention for passing the Banking Bill. State Bank of India gained 1.2 percent, recovering from an earlier fall of as much as 2.8 percent.

Parliament is expected to amend the banking laws that include raising the limit on shareholders’ voting rights in public and private sector banks, a step seen largely positive towards the government’s reform drive.

Meanwhile, The Mid-Year Economic Analysis shows the country is heading for its lowest growth in a decade of 5.7 to 5.9% this fiscal. Chief Economic Advisor Raghuram Rajan anticipates that with the positive momentum we will see 6% growth in second half. Confidence inducing Budget, speeding up clearance for projects, and further steps in capital market reform are his suggestions to push growth.

Stocks in news

JSW Steel surged 4.58 percent to Rs 801.95 on BSE, with the stock extending Monday’s 2.96% gains triggered by the company signing a joint agreement with Japan’s JFE Steel Corporation for non-oriented electrical steel sheets.

Axis Bank lost 0.65 percent after the bank on Monday said it will issue a maximum of 4.58 crore equity shares through GDR/QIP issue and preferential allotment to promoters.

Jaiprakash Power closed 6.68 percent lower er the company’s promoters sold 49.7 million shares, or about 2 percent of its equity, at an average price of 39 rupees a share. The block deal was at a 6.14 per cent discount to Monday’s closing price Rs 41.55, according to Thomson Reuters data. The company raised about Rs 194 crore in a series of block deals on the Bombay Stock Exchange, the data showed.