Markets end on a firm note post repo rate cut

BSE Realty index advances 2%

Key benchmark indices ended the day on a firm note after the Reserve Bank of India (RBI) cut repo rate by an unexpectedly sharp 50 basis points. The BSE Sensex ended (provisional) at 17,370, up 219 points and the Nifty at 5,294, up 68 points.

---------------------------------------------------------------------------------------

(Updated at 1422 hours)

The markets continued to witness positive trades in late-noon deals with the BSE Sensex at 17,298, up 147 points and the Nifty at 5,269, up 42 points, after the Reserve Bank of India (RBI) surprisingly cut repo rate by an unexpectedly sharp 50 basis points.

The RBI cut its policy repo rate to 8%, compared with market and expert expectations for a 25 basis point cut. It kept the cash reserve ratio (CRR), the portion of deposits which banks are required to keep with the central bank, unchanged at 4.75%. It also warned that India's current account deficit, which widened to 4.3% of GDP in the December quarter, is "unsustainable" and will be difficult to finance given projections of lower capital flows to emerging markets in 2012.

Earlier in the day, the BSE benchmark index touched the day's high at 17,373 and the day's low at 17,103.

In Asia, Japanese shares steadied after the previous session's sharp losses, though social gaming firm Gree Inc jumped as an upbeat sector report from Bank of America Merrill Lynch forced investors to cover short positions. The Nikkei closed down 0.1% at 9,464.71 after shedding 1.7% on Monday, falling below the psychological key level of 9,500 on concerns over Spain's ability to finance its debt. The Hang Seng and Shanghai Composite indices    ended lower by 0.23% and 0.94%, respectively.

European markets are higher today with shares in France leading the region. The CAC 40 is up 0.63% while Germany's DAX is up 0.48% and London's FTSE 100 is up 0.46%.

Back home, Deven Choksey, MD, KR Choksey Securitie said, "Banks are favourably placed currently as there is ease in Inflation. Further, with this 50 bps rate cut, they have been given some relief on the liquidity front. The interest rate cut has arrested the declining growth while keeping the Inflation numbers under control. The RBI will try to make sure that liquidity is available in the system, which will lead to further rate cuts in the coming months."

Meanwhile, On Monday, the headline wholesale price index eased slightly to 6.89% for March but was still above expectations, as a drop in manufacturing inflation was offset by a surge in food inflation.

Shares of rate-sensitive sectors such as banking, real estate and automobiles are gaining in trades, post the anouncement by the RBI. BSE Realty index is at 1,810 levels, up 2%. The prominent gainers from the space are DB Realty, HDIL, DLF and Unitech, up 2-3% each.

BSE Bankex and Auto indices have advanced 1% each after having recovered from their losses.

All the sectoral indices are in the green, except for BSE Consumer Durables index, down marginally.

Coal India has advanced 3% at Rs 350 and is the top gainer on the Sensex after the company’s board of directors approved the draft of the fuel supply agreements (FSA) to be signed with power plants before April 20 with almost a negligible penalty level in case they fail to meet 80% commitment mark. The board has decided to keep the penalty at 0.01% of the value of shortfall. Other prominent gainers include ONGC, Hero MotoCorp, DLF and Hindalco Industries, up 1-3% each.

Mahindra & Mahindra, Reliance Industries, Maruti Suzuki and HDFC Bank, down marginally, are the only losers from the pack.

The overall market breadth is positive as 1,409 stocks have advanced against 1,248 declining ones, on the BSE.