Markets firm up as rate cut in-line with expectations

Benchmark indices firmed up in late morning trades after the RBI cut repo rate by 25bps which was on expected lines

Benchmark indices firmed up in late morning trades after the Reserve Bank of India in its second Quarter Review of Monetary Policy 2013-14 today announced a hike in repo rate by 25 bps which was on expected lines. However, gains were capped at higher levels after the RBI said retail inflation will continued to remain high.

At 11:15AM the Sensex was up 28 points at 20,598 and the Nifty was up 14 points at 6,115.

RBI in its monetary policy review today hiked the repo rate by 25 bps to 7.75%. The MSF rate was cut by 25 bps to 9.25%. CRR was left unchanged at 4%. The central bank cuts the FY14 GDP growth forecast to 5% from 5.5%. Giving a CPI forecast for the first time, the RBI said retail inflation will remain above 9%, adding that both WPI and CPI will remain elevated in the months ahead.

Foreign institutional investors (FIIs) bought shares worth a net Rs 636.78 crore on Monday, as per provisional data from the stock exchanges.

Asian shares were trading lower as investors turned cautious and booked profit ahead of the outcome of the U.S. Federal Reserve's policy meet this week, at which it is widely expected to stay the course on stimulus.

Japan's Nikkei stock average was down 0.2% after rising sharply on Monday. The benchmark index was trading firm in early trades bolstered by data showing consumer spending in Japan jumped in September as shoppers frontloaded purchases before a sales tax increase next year.

At 11:15AM post the policy announcement the rupee was quoting at Rs 61.57 compared with previous close of Rs 61.53 per dollar.

Bankex was the top gainer among the sectoral indices on the BSE followed by Consumer Durables, Auto, Healthcare, Metal, Oil and Gas indices up 0.3-1.4% each.

In the banking segment, ICICI Bank, HDFC Bank and SBI were up 0.4-2.3% each.

Maruti Suzuki was up nearly 7% after reporting a better than expected net profit at Rs 670 crore for the quarter ended September 2013 (Q2FY2014), driven by strong growth in exports, favorable exchange rate and cost control measures. Analyst on an average had expected profit of Rs 551 crore for the quarter. The company had reported profit of Rs 227 crore in year ago quarter.

Sun Pharma was up 1.4% after the company said it has addressed the United States Food and Drug Administration’s (USFDA) concerns about quality control breaches at a U.S. subsidiary that was shut down by the regulator for three years because of manufacturing flaws.

Other Sensex gainers include, Hindustan Unilever, Sesa Sterlite and Tata Motors among others.

Among other shares, SRF has dipped 5% to Rs 165 on NSE after reporting 37% year on year (yoy) fall in standalone net profit at Rs 48 crore for the quarter ended September 2013 (Q2) due to forex loss. The company had posted profit of Rs 75 crore in a year ago quarter.

The company absorbed a loss of Rs 6.54 crore during the period against a gain of Rs 41.54 crore during corresponding period last year on account of foreign exchange fluctuations.

Persistent Systems has rallied nearly 8% at Rs 858, extending its over 13% rally in past seven trading sessions on the Bombay Stock Exchange (BSE). Shares of IT consulting and software firm currently trading at its new high, has outperformed the market by surging 23% from Rs 700 on October 17, after reporting a better than expected revenue growth and margin expansion largely driven by IP-led revenue. The benchmark index has gain 0.75%, while IT index was down 0.45% during the same period.

The broader markets are trading mixed with the BSE Midcap up 0.1% and Smallcap index is down 0.3%.

The market breadth in BSE remains weak with 970 shares declining and 719 shares advancing.