Giving thumbs up to RBI’s status quo stance in second bi-monthly monetary policy, Indian equity markets rallying for second consecutive session and accumulating gains of over 3/4th of a percent, settled at record high closing levels on Tuesday. Besides, the status quo stance for key policy repo rate, which was left unchanged at 8%, markets took a heart from dovish tone of RBI, which in its policy rationale and guidance, underscored that if the economy stays on this course, further policy tightening will not be warranted, but on the other hand, if disinflation, adjusting for base effects, was faster than currently anticipated, this would provide headroom for an easing of the policy stance. By close of trade, both Sensex and Nifty ended past the crucial 24,850 and 7,400 levels respectively. Meanwhile, broader indices also participated into this rally and ended with gains in the range of 0.65%-1.25%.

On the global front, Asian shares rode higher on Tuesday, supported by solid US and Chinese data. Shares were bolstered by the US Institute for Supply Management’s manufacturing activity index rising to 55.4 in May from 54.9 in April. Meanwhile, European shares were trading lower ahead of key euro zone inflation data and also on account of caution ahead of this week’s European Central Bank (ECB) policy meeting.

Closer home, majority of the sectoral indices on BSE ended into positive territory, with only exception being stocks from Healthcare, Fast Moving Consumer Goods and Information Technology counters which were the top losers of the session. On the flip side, stocks from Metal, Realty and Public Sector Undertaking counters were the prominent gainers. Meanwhile, shares of sugar refiners rose sharply on expectations that the new government would push ethanol blending in petrol and increase the import duty on the sweetener to support local prices. Besides, steel stocks also gained after positive manufacturing data in a private survey in China, the world’s biggest consumer and producer of the metal. China’s factory sector turned in its best performance in four months in May as export orders improved although activity still contracted, a private survey showed on Tuesday, adding to signs the economy may be stabilizing. Additionally, Auto counter too staged a heartwarming performance, while Hero MotoCorp extended Monday’s gains triggered by the company’s strong sales in May, Eicher Motors rose after the company reported strong motorcycle sales in May. Besides, Cement stocks too were on investors’ radar, with Grasim Industries scaling a 52 week high level in intra-day trade. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1919: 1096, while 91 scrips remained unchanged. (Provisional)

The BSE Sensex gained 173.74 points or 0.70% to settle at 24858.59. The index touched a high and a low of 24892.06 and 24626.97 respectively. Among the 30-share Sensex, 17 stocks gained, while 13 stocks declined. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.63% and Small cap index was up by 1.18%. (Provisional)

On the BSE Sectoral front, Metal up by 5.06%, Realty up by 3.15%, PSU up by 1.87%, Oil and Gas up by 1.76% and Consumer Durables up by 1.44% were the gainers while, FMCG down by 0.75%, Healthcare down by 0.50%, Bankex down by 0.18% and  IT down by 0.04%, were the few losers in the space. (Provisional)

The top gainers on the Sensex were Tata Steel up 6.74%, SSLT up by 6.03%, Coal India up by 5.33%, ONGC up by 4.45% and BHEL up by 3.66%. On the flip side, the key losers were Dr. Reddys Lab down by 3.07%, GAIL down by 2.04%, HUL down by 1.67%, ITC down by 1.22% and Bharti Airtel down by 1.05%. (Provisional)

Meanwhile, the government has slashed the import tariff on gold to $408 per 10 gram from $424 and silver to $617 per kg from $650 per kg, in line with global rates of the precious metals, which could lead to some softening in the prices. Tariff value or the base price is set to determine the customs duty on the precious metal and to prevent under invoicing. The government revises import tariff value on a fortnightly basis taking into account the volatility in global metal prices.

During the recent months, global gold prices have been declining as positive US economic data backed the latest Federal Reserve’s move to keep on reducing monetary stimulus which has dimmed the precious metal’s appeal. Taking global cues, domestic gold rates in the national capital Delhi declined to 11-month low at Rs 27,400 per 10 grams.

Gold is the second largest import item for India after crude oil. The government had taken various measures like high customs duty of 10% and 80/20 rule to curb gold shipments to check country’s widening current account deficit (CAD). Gold and silver imports fell by 40.02% to $33.46 billion in FY14 due to these stern Government’s norms. Low gold imports also helped India to contain current account deficit (CAD) at 1.7 percent of GDP or $32.4 billion in FY 14 as compared to $87.8 billion, or 4.7 percent of GDP in FY13.

India VIX, a gauge for markets short term expectation declined 4.25% at 15.79 from its previous close of 16.49 on Friday. (Provisional)

The CNX Nifty gained 51.95 points or 0.71% to settle at 7,414.45. The index touched high and low of 7,424.95 and 7,342.15 respectively. Out of 50 stocks in Nifty, 31 stocks ended in the green and 19 in red. (Provisional)

The major gainers of the Nifty were Tata Steel up 6.72%, SSLT up by 5.98%, Coal India up by 5.64%, DLF up by 5.21% and Grasim up by 5.16%. On the flip side, the key losers were Dr. Reddys Lab down by 2.30%, HCL Tech down by 2.03%, Indusind Bank down by 1.86%, GAIL down by 1.84% and Kotak Mahindra Bank down by 1.51%. (Provisional)

Most of European markets were trading in red; UK’s FTSE 100 down by 0.34%, Germany’s DAX down by 0.27% and France’s CAC 40 was down by 0.07%.

Hong Kong Retail Sales fell to a seasonally adjusted annual rate of -9.8%, from -1.3% in the preceding month. Japan’s Monetary Base fell to 45.6%, from 48.5% in the preceding month while Japan’s Average Cash Earnings rose to a seasonally adjusted 0.9%, from 0.7% in the preceding quarter. Thai consumer confidence jumped in May on hopes a new military government would impose order after months of political chaos that had threatened to tip the economy into recession.

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Second Bi-Monthly Monetary Policy Review for 2014-15 (Apr-Mar)

Second Bi-Monthly Monetary Policy Review for 2014-15 (Apr-Mar)

  • Keep repo rate unchanged at 8.00%
  • Cuts SLR by 50 bps to 22.5%
  • SLR cut effective from fortnight starting Jun 14
  • Reverse repo unchanged at 7.00%
  • MSF unchanged at 9.00%
  • Keep banks’ CRR unchanged at 4.00% of NDTL
  • Liquidity under export credit refinance cut by 50 bps to 32%
  • Continue to provide liquidity under 7-, 14-day term repos
  • To introduce special term repo of 0.25% of NDTL
  • To continue with term repos of up to 0.75% of NDTL
  • Reiterates CPI inflation target of 8% for Jan 2015
  • Reiterates CPI inflation target of 6% by Jan 2016
  • If econ stays on course, more policy tightening not warranted
  • Excluding food, fuel, CPI inflation edging down
  • Appropriate at this juncture to leave rates unchanged
  • Need to allow earlier rate hike to mitigate inflation pressure
  • Committed to keeping econ on disinflationary path
  • Since April policy global activity evolving at different speed
  • Growth is gaining traction in US, UK
  • Structural issues continues impeding growth in emerging econs
  • If disinflation falls faster, it will give headroom for easing
  • Faster disinflation to provide room for easing stance
  • FIIs can participate in exchange traded FX derivatives
  • Further tightening not needed if disinflation on course
  • Strong poll mandate could revive demand during year
  • FII FX derivative play to extent of exposure plus $10 mln
  • Hiked FX remittance under liberalised scheme cap to $125,000
  • Invest demand, credit will pick up as econ recovers
  • Indians, non-residents allowed to take out up to 25,000 rupees
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