Markets lose steam as RBI hikes short-term rates

Markets continued to trade lower in the late-morning session this Tuesday on back of selling pressure witnessed in financials after the central bank hiked two key short-term rates.

RBI last night hiked the lending rates for banks and sucked up of Rs 12,000 crore to stem the continuing fall of rupee.   Under the measures announced, RBI raised lending rates to commercial banks 2% to 10.25% making the loans costlier.

These measures dampened any hopes of rate-cut in the near term thereby raising growth concerns in the Asia's third-biggest economy.

At 11:30AM, the 30-share Sensex declined 291 points at 19,743 and the 50-share Nifty shed 98 points at 5,932 levels.

Rupee pared its earlier gains and traded at 59.38 per US dollar. The partially convertible currency had lost 33 paise, the most in a week, to close at 59.89 against the dollar yesterday on fresh demand from banks and importers amid disappointing industrial production, a fall in exports and higher inflation.  

Meanwhile, the Asian Development Bank (ADB) has pegged the country’s growth at 5.8% this year, owing to slow progress in pushing through the reforms needed to ease business bottlenecks.

Globally, Asian shares traded mixed. Japan’s Nikkei gained 0.5% to 14,578, Singapore Straits Times declined 0.3% to 3,227, China’s Shanghai Composite index was down 0.2% at 2,054 while Hong Kong’s Hang Seng gained 0.1% to 21,335 today.

Among the key sectoral indices, oil & gas and healthcare gained while realty, capital goods, bankex sectors dropped on the BSE.

The gainers included counters such as ONGC gaining 2%, Sun Pharma rose 1.3%, ITC gained 0.7%, TCS was up 0.5% on the BSE.

The laggards were ICICI Bank and SBI shedding 5-5% each, HDFC declined 4.2%, Larsen & Toubro shed 3.6%, Sterlite Industries 3.2% on the BSE.

The key notable movers included counters such as Kohinoor Foods is locked in upper circuit for second consecutive day, up 20% at Rs 55.25 on BSE after the Abu Dhabi-based Al Dahra International Investment LLC has decided to invest about Rs 112 crore in the company through equity shares allotted on a preferential basis.

Crompton Greaves is trading higher by 3.4% at Rs 92, in otherwise weak market, on the commencement of buyback offer today. The offer will be closes on January 15, 2014.

The broader markets traded lower with mid-caps and small-caps declining 1 per cent on the BSE.

The market breadth was negative. Out of 1,905 stocks traded so far, 1,186 stocks declined while 613 stocks advanced on the BSE.