Markets shrug off Q2 GDP as RBI keeps key rates unchanged

Markets have closed the session on a flat note after the Reserve Bank of India (RBI) kept the repo rate steady at 6.75%.  Raghuram Rajan said that the uptick in retail inflation in the last two months, especially in non-food items, warrants vigilance.

The Sensex gained 24 points to end at 26,169 and the Nifty rose by 20 points to close at 7,955.  The broader markets outperformed- BSE Midcap and Smallcap indices were up 0.4-0.6%.

"The RBI has kept rates unchanged, as per our and consensus expectations. The stance remains accommodative and the RBI is hoping that transmission of the earlier rate cuts happens in due course. Inflation projections for next year have been increased a notch by 0.2% because of uncertainty on the food and energy prices," said Mihir Vora- Director and Chief Investment Officer, Max Life Insurance.

Adding: "The Governor is not too concerned about the impact of the 7th Pay Commission recommendations on the fiscal deficit and inflation since these may already have been factored in by the Government. All in all, no change from the trends seen earlier. We expect no further rate cuts till the end of this financial year."

In overseas stock markets, Asian shares edged higher amid speculation that the European Central Bank will announce a round of fresh measures to boost the eurozone economy at its regular monetary policy review scheduled later this week.

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Back home, India’s gross domestic product (GDP) for the three-month period ended  September 30 grew 7.4%— a tad higher than the 7% in the previous quarter — with a boost from manufacturing and financial services.  

Rate sensitive shares ended mixed with BSE Auto and Bankex indices down between 0.2-0.5% each while the BSE Realty index is up by 0.4%.

Ranak Merchant, Technical Analyst - Strategies from Sushil Financial Services says, “December sets in with a mixed note as benchmark indices end the month of November lower by over 1.50% for Nifty while Bank Nifty gained 0.43% in the month. The month kicks off with the RBI policy meet, the Governor leaving key policy rates unchanged. With one event already behind us, world markets including our own, would watch the Fed Meet of December 15 & 16 and also the ECB and BOJ decisions. On technical parameters, Nifty is now above one hurdle of 7,907 and is trading in and around the next level of 7,952, a close above which is essential for the next move towards 8,145 to unfold."

Banking shares ended mixed after the Reserve Bank of India (RBI) has kept key policy rates unchanged.

Axis Bank, Yes Bank, Bank of Baroda, Bank of India and Punjab National Bank from the Nifty Bank index were down less than 1%, while State Bank of India, IndusInd Bank, ICICI Bank and HDFC Bank ended flat.

Most auto shares ended weak post the announcement of monthly sales numbers for the month of November. Tata Motors, Hero Moto, Bajaj Auto, Maruti Suzuki and M&M fell between 0.1-1.4%.

Maruti Suzuki has reported an increase of more than 10% in domestic sales during November on the back of higher demand due to Diwali.

Bharti Airtel dipped nearly 4%, extending its previous day’s 2% decline on the BSE, after the company announced that it plans to invest Rs 60,000 crore over the next three years to expand its network.

Among other shares, Jubilant Life Sciences moved higher by upto 9% after the company said it has received approval Paroxetine tablets, the generic version of Paxil tablets, which is used as an antidepressant.

Eicher Motors dipped 3% after 2/3 wheeler maker said it has reported 48% year on year (YoY) growth in total sales at 40,769 units during the month of November 2015.