Volatility ruled the roost as the key benchmark indices recovered from lower level, soon after hitting fresh intraday low. The Reserve Bank of India (RBI) today, 16 September 2010, raised its repo rate, or benchmark lending rate, by a quarter point to 6%, at a mid-term monetary policy review. The central bank also hiked the reverse repo rate, or the rate at which it borrows funds, by half a point to 5%. Both these changes will take place with immediate effect

The market breadth turned weak. The breadth was positive earlier in the day. Interest rate sensitive realty stocks extended early fall. Banking stocks were mixed and auto stocks rose after the Reserve Bank of India’s rate hike. IT stocks slipped on profit booking. The BSE 30-share Sensex was down 53.39 points or 0.27% to 19,448.72. Weakness in Asian markets and lower US index futures, weighed on the domestic bourses.

The Reserve Bank of India said that the growth rate indicates that the economic recovery is consolidating and the economy is rapidly converging to its trend rate of growth. Inflation remains the dominant concern in macroeconomic management, it added

Bond yields rose amid high volatility after the RBI hiked rates. The yield on the benchmark 10-year 2020 bond was hovering at 7.97%, higher than Wednesday’s (15 September 2010) close of 7.95%. The yield on the second most traded, 8.13% 2022 bond was hovering at 8.10%, higher than Wednesday’s close of 8.08%.

The latest data showed the food price index rose 15.1% while the fuel price index climbed 11.48% in the year to 4 September 2010, under a new series with different base year, components and weightings. The primary articles index was up 16.22%.

Coming back to stocks, foreign institutional investors (FIIs) are in a buying spree in India. As per provisional figures, FIIs bought shares worth Rs 2214.99 crore on Wednesday, 15 September 2010. Domestic institutional investors sold shares worth Rs 909.96 crore on that day.

FII inflow in September 2010 totaled Rs 8939.10 crore (till 14 September 2010). FIIs had bought equities worth Rs 11687.50 crore in August 2010. FII inflow in the calendar year 2010 totaled Rs 68320.80 crore (till 14 September 2010).

Buoyed by earnings growth in banks, financial services and manufacturing firms, Corporate India has paid 15% higher advance tax in the June-September 2010 quarter over the year-ago period. Companies pay advance taxes in four installments throughout the year based on the business they are doing and hence, the advance tax payments made are seen as a barometer of the companies’ performance.

The government’s indirect tax collections grew 45% to Rs 27,947 crore in August 2010 over August 2009. For the first five months from April 2010 to August 2010 of the current fiscal, the centre’s indirect tax collections grew nearly 46% to Rs 1,24,170 crore over the previous year. The centre has targeted indirect tax collections of Rs 3.15 lakh crore for the fiscal year ending March 2011.

Asian stocks fell on Thursday as resource sector stocks declined in the wake of lower commodity prices. The key benchmark indices in Indonesia, Hong Kong, Singapore, South Korea, Taiwan and China were down by between 0.07% to 2.54%

Japanese stocks swung between gains and losses amid doubts over whether the weakness in the yen will continue. The Nikkei 225 average was down 0.07%. Japanese monetary authorities are estimated to have spent as much as 1 trillion yen, or about $11.6 billion, on Wednesday in a bid to weaken the yen, the Yomiuri Shimbun reported on its Web site. Other reports put the total at as much as twice that.

Closer home, India’s industry began the second quarter on a strong footing, clocking 13.8% growth in July 2010, data late last week showed. The growth rate, the highest in two months, exceeded market expectations. The growth was driven by a strong showing by the manufacturing sector, particularly the capital goods segment.

Meanwhile, the government revised downwards the industrial production growth for June 2010 to 5.76% from earlier 7.1%

Going ahead, good monsoon rains this season will raise farm output, boost rural incomes and lower food inflation. The south west monsoon is important for India as about 60% of the country’s farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector.

At 12:20 IST, the BSE 30-share Sensex was down 53.39 points or 0.27% to 19,448.72. The Sensex rose 57.50 points at the day’s high of 19,559.61 in early trade, its highest level since 18 January 2008. The index fell 82.20 points at the day’s low of 19,419.91 in early afternoon trade.

The S&P CNX Nifty was down 38.90 points or 0.66% to 5,822.05. Nifty struck a high of 5,874.15 in early trade, its highest level since 18 January 2008.

The market breadth, indicating the health of the market turned weak. The breadth was positive in early trade. On BSE, 1773 shares fell while 1101 shares rose. A total of 106 shares remained unchanged.

The total turnover on BSE amounted to Rs 2462 crore by 12:15 IST compared with Rs 1769 crore by 11:25 IST

From the 30-share Sensex pack, 19 stocks declined while the rest of them gained. Jaiprakash Associates (down 1.28%), Sterlite Industries (down 1.50%), and Bharti Airtel (down 1.17%), edged lower from the Sensex pack.

Hero Honda Motors (up 0.72%), Hindustan Unilever (up 0.72%), and ACC (up 0.33%), edged higher from the Sensex pack.

Interest rate sensitive banking shares saw mixed trend in volatile trade after the RBI’s monetary policy review. India’s largest bank by net profit and branch network State Bank of India (SBI) advanced 1.63% to Rs 3,110.50 on reports it is in talks with the Reserve Bank of India to form a holding company to control its equity. It was the top gainer from the Sensex pack.

SBI has reportedly paid advance tax of Rs 1924 crore in Q2 September 2010, compared with Rs 1832 crore in Q2 September 2009.

Other banking pivotals were mixed ahead. India’s largest private sector bank by net profit ICICI Bank rose 0.25% while India’s second largest private sector bank by net profit HDFC Bank slipped 0.27%.

Realty stocks extended early slide after the Reserve Bank of India’s rate hike. DLF (down 1.54%), Unitech (down 1.16%), Indiabulls Real Estate (down 1.37%), Parsvnath Developers (down 0.71%), Omaxe (down 1.79%), declined.

But, auto shares gained in volatile trade on optimism good monsoon rains this season will boost rural sales. India’s top small car maker by sales Maruti Suzuki India rose 1.44%, on reports the company is planning to roll out a multi utility vehicle at the start of 2012.

India’s largest tractor and utility vehicles maker Mahindra & Mahindra (M&M) rose 0.09%. India’s largest truck maker by sales Tata Motors rose 0.85%.

A recent Society of Indian Automobile Manufacturers data showed domestic automobile sales rose 25.24% to a record 12.63 lakh units in August 2010 in over August 2009, boosted by rising incomes, new models and lower borrowing costs. Exports climbed 28% to 191,033 units.

Index heavyweight Reliance Industries (RIL) slipped 0.39% to Rs 1006.50. The stock had risen over 2% on Wednesday on reports the company paid 13% higher advance tax at Rs 1308 crore in Q2 September 2010, compared with Rs 1157 crore in Q2 September 2009.

IT stocks took a breather after the recent surge. India’s second largest software services exporter by sales Infosys Technologies lost 2.14% to Rs 2,985, halting an eight-day 10.88% rally, on profit booking.

India’s largest IT exporter by sales TCS slipped 1.82%, ending a three-day winning streak. TCS announced before market hours on Wednesday, 15 September 2010, that it has entered into a significant multi-year agreement with SUPERVALU Inc, one of the largest grocery retailers in North America, for full services engagement.

India’s third largest software services exporter Wipro declined 0.46%, reversing two-day gains. Wipro recently appointed billionaire founder-chairman Azim Premji’s oldest son Rishad Premji as chief strategy officer.

Source:http://www.indiainfoline.com/Markets/News/Market-slides-to-the-days-low-as-RBI-hikes-key-policy-rates/3295581520