Markets remain range bound; Metal Index up 3%

Metal shares gained on hopes of demand from China while banks pared gains after RBI kept key rates unchanged

Metal shares firmed up, amid range bound trades, on hopes of renewed demand from China while bank shares pared gains after the Reserve Bank of India at its bi-monthly policy today kept key policy rates unchanged.

At 11:55AM the 30-share Sensex was up 43 points at 24,727 and the 50-share Nifty was up 12 points at 7,375.

The RBI has kept the repo rate unchanged at 8% and the Cash Reserve Ratio unchanged at 4%. However, the Statutory Liquidity Ratio (SLR) was reduced by 50 basis points to 22.5% with effect from the fortnight beginning June 14.

The Indian rupee was trading lower at Rs 59.17 against the US dollar compared to its previous close of Rs 59.15 after the RBI maintained a neutral stance and kept key policy rates unchanged. The rupee had lost 4 paise to close at 59.15 against the US dollar in Monday's trade due to sustained demand for the US currency from importers, amid firm dollar overseas.

Asian markets were trading higher on the back of encouraging data from the US and China, the world's largest economies. China's manufacturing grew at its fastest pace in the five months to May while US Institute for Supply Management's manufacturing activity index edging higher to 55.4 in May compared with 54.9 in the previous month. Nikkei was up 0.9% while the Hang Seng and Shanghai Composite was up 0.3-0.6% each.

Among the interest-rate sensitive sectors Realty Index was up 1.1% while Bankex and Auto indices were trading flat post the RBI policy announcement. Metal index was the top gainer among the sectoral indices up 2.4%.

Metal shares firmed up on hopes of revival in export demand after encouraging manufacturing data from China which recorded its fastest growth in May. China's official PMI of manufacturing activity in May was up at 50.8, a five-month high, compared with 50.4 in March.

Sesa Sterlite was the top Sensex gainer up 4.1% at Rs 291 followed by Tata Steel up 3.4% and Hindalco up 1%. Hindustan Zinc, SAIL were up 2.3% each while Jindal Steel gained nearly 2% and Coal India was up 3.3%.

Larsen & Toubro extended gains post its robust fourth quarter earnings and was up 1% at Rs 1,661.

In the oil and gas space, Reliance Industries was up 0.5% and ONGC gained 0.8%.

FMCG majors witnessed profit taking on concerns that rising inflation levels would hurt volume growth. ITC and Hindustan Unilever were down 1.2-1.5% each contributing the most to the Sensex decline.

Banks are trading marginally lower. ICICI Bank has weakened by 0.6% at Rs 1453, HDFC Bank has shed 0.5% at Rs 815, Axis Bank and SBI are virtually unchanged at Rs 1900 and Rs 2642 respectively.

In the broader market, the BSE Mid-cap index was up 0.6% and Small-cap index was up 0.8%.

Market breadth was strong with 1,541 gainers and 1,031 losers on the BSE.