Benchmarks trim some gains; broader indices outperform

Local equity markets after continuing its previous session jubilant mood in the early trade have now pared some of its gains in line with the regional counterparts. Profit booking in Realty, Consumer Durable and Healthcare counters has mainly dragged the benchmarks from their intra-day's high. Meanwhile, fall in the market heavyweights has also weighed on the trading sentiment. As the market bellwether -Reliance Industries- is trading lower close to 0.50%, while ICICI Bank too has declined 1%. On the global front, Wall Street bulls took the upper hand on Tuesday as hopes for a new plan to deal with Greece's debt crisis soothed some investors worry. Meanwhile, Asian shares were trading mixed with negative bias. The US future indices were showing an uptick in the screen trade. Back home, stocks from Capital Goods, Power and TECk counters on the BSE sectoral front were witnessing major traction. Besides these, broader indices too doing well for themselves were outperforming their larger counterparts. The barometer index on Bombay Stock Exchange (BSE)-Sensex and National Stock Exchange (NSE)-Nifty were trading above their physiological level of 18,500 and 5,500 respectively. The overall market breadth on BSE is vastly in the favour of advances which have outpaced declines in the ratio of 1586:909, while 114 shares remained unchanged.

The BSE Sensex is currently trading at 18,553.51, up by 50.23 points or 0.27%. The index has touched a high and low of 18,636.12 and 18,514.66 respectively. There were 20 stocks advancing against just 10 declines on the index. 

The broader indices were outperforming their larger counterparts; the BSE Mid cap and Small cap indices surged 0.54% and 0.75% respectively.

On the BSE Sectoral space, the top gainers were CG up by 0.82%, PSU up by 0.79%, Power up by 0.61%, TECk was up by 0.51% and IT up by 0.29%.  While on the losers side Realty down by 0.81%, CD was down by 0.66%, HC down by 0.57% and Oil & Gas down by 0.20%.

The top gainers on the Sensex were NTPC up by 2.60 %, RCom up by 1.96%, Bharti Airtel up by 1.78%, SBI up by 1.34% and L&T was up by 1.22%.

On the flip side, DLF down by 1.82%, ICICI Bank 1.10%, Tata Motors was down by 0.80%, RIL down by 0.57% and Tata Steel down by 0.53% were the only losers on the Sensex. 

Meanwhile, the RBI governor ignored the recommendation made by the majority of central banks technical advisory committee (TAC) and went ahead with the 50 basis point hike in RBI's annual monetary policy. The majority of TAC was in favour of 25 basis point hike for the annual monetary policy; only 2 out of 6 members were in favour of 50 basis point hike, this was disclosed in the minutes of meetings (MoM) of its twenty-fourth meeting of the TAC on Monetary Policy held on April 27.

According to the MoM, while four members of the committee were of the view that the repo and reverse repo rates be raised by 25 basis points each, two members suggested a 50-basis point increase each in the repo rate and the reverse repo rate". 'In addition to increase in the policy rates by 25 basis points each, one member was of the view that the statutory liquidity ratio (SLR) could be increased by 100 basis points and the repo facility of the Reserve Bank be limited up to 2 per cent of excess SLR securities held by banks.

Earlier D Subbarao, Governor and Chairman of the TAC had gone by the suggestions made by TAC to ensure growth and fight inflation, but this time governor went against the recommendation despite the fear of slowing down the industrial growth. At annual monetary policy review, RBI had raised the repo and reverse repo rate by 50 basis points to 7.25% and 6.25% respectively. This was the 9th policy rate hike from March 2010.

RBI governor was highly criticized by the economist and analyst for this unexpected hike in policy rate to control inflation. According to experts, this 50 basis point hike in policy rates will have adverse effect on the economic growth and investment scenario.

Inflation, calculated by Wholesale Price Index showed moderation to 8.66% in April from 9.04% in March, which is much above the RBI's comfort level of 5 to 6%. In the monetary policy statement on May 3 governor had said, 'Inflation is inimical to sustained growth as it harms investment by creating uncertainty. Current elevated rates of inflation pose significant risks to future growth. Bringing them down, therefore, even at the cost of some growth in the short run, should take precedence.'

The S&P CNX Nifty is currently trading at 5,572.10, higher by 11.95 points or 0.21%. The index has touched a high and low of 5,595.75 and 5,559.45 respectively. There were 31 stocks advancing against 18 declines on the index. 

The top gainers of the Nifty were SAIL up by 3.06%, NTPC up by 3.03%, Ambuja Cements was up by 2.59%, RCom up by 1.96% and ACC up by 1.90%.

On the flip side, Ranbaxy down by 2.49%, DLF down by 1.88%, Sunpharma down by 1.61 %, IDFC down by 1.41% and Tata Motors was down by 1.02%.

The Asian equity indices were trading mixed; Nikkei 225 gained 0.22%, Straits Times advanced 0.54%, and Taiwan Weighted climbed higher by 0.82%. 

On the flip side, Seoul Composite declined 0.18%, Hang Seng was down by 0.36%, KLSE Composite lost 0.18% and Shanghai Composite slid 0.25%.

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