Markets recover from day's lows; Auto index up 1.8%

Auto and cement shares were among the top Sensex gainers alongwith Infosys

Markets staged a recovery in late trades as gains in auto and cement shares along with Infosys helped offset losses in ICICI Bank and Reliance Industries.

At 2:25PM, the 30-share Sensex was up 113 points points at 25,835 and the 50-share Nifty was up 40 points at 7,724.

The Reserve Bank of India kept key rates unchanged in its policy review meet today, but cut the SLR by 50 bps to 22%.

The repo rate stands unchanged at 8% and CRR at 4%. This is the second consecutive time that the rates have been left unchanged due to stubborn inflation.

The Reserve bank also cut the HTM ceiling to 24%.

The broad expectation was that the RBI will keep the repo rate (at which it lends to banks) unchanged at 8%. This is despite a lower print for the Consumer Price Index (CPI)-based inflation for June. The latter rose 7.31% from a year earlier in June, compared with a rise of 8.28% in May. This is under RBI's January-end projection of 8%, though above its comfort level.

Further, according to a private market survey, India's services sector grew at a slower pace in July because of moderation in order flows. The headline HSBC Services Business Activity Index stood at 52.2 in July, lower from June's 17-month peak of 54.4.

Asian shares were trading lower amid concerns of weak services sector growth from China. The Nikkei ended down 1% at 15,320.31. Singapore's Straits Times and Hang Seng were up 0.2% each while China's Shanghai Composite was trading flat with negative bias.

European shares were trading higher after Portugal's financial rescue of its largest listed bank Banco Espirito Santo boosted investor sentiment. The CAC-40, DAX and FTSE-100 were each trading 0.5-0.8% higher.

The BSE Auto index was the top sectoral gainer up 1.7% followed by Consumer Durables, Healthcare and Realty indices on the BSE while FMCG, Capital Goods were among the top losers. However, Bankex was trading flat.

Among the rate sensitive shares, financials witnessed a mixed rend post the policy action by the RBI while Auto and Realty shares remained firm.

Auto shares witnessed renewed buying interest on the back of upbeat July sales growth. Bajaj Auto, M&M, Tata Motors, Maruti Suzuki were up 1-2.5% each.

However, Hero MotoCorp was down 1% ahead of its June quarter earnings later today.

Infosys and ONGC were among the top Sensex gainers.

In the defensive pack, pharma shares witnessed renewed buying interest with Sun Pharma up 2% and Dr Reddy's Labs up 1%.

Cement shares were also among the gainers with ACC, Ambuja Cements, Grasim, UltraTech up over 3% each.

ITC trimmed losses and was marginally down. The FMCG major increased the prices of some of its cigarette brands by up to 23%. While the new stocks with revised prices are yet to hit the market, smokers are already being asked to pay more than the maximum retail price printed on cigarette packs.

Index heavyweight Reliance Industries was down 0.6%.

In the broader market, the BSE Mid-cap index was up 0.5% and BSE Small-cap index was up 0.7%.

Market breadth was strong with 1,401 gainers and 1,000 losers on the BSE.