Nifty erases gains after crossing 9,700; IT stocks buck trend

Gains were, however, capped by a negative trend in global markets

The benchmark Nifty erased entire morning gains to slip in red after hitting record high, crossing its crucial 9,700-mark for the first time ever. The S&P BSE Sensex also hit its all-time high of 31,355.  

The market pared gains tracking negative trend seen in global markets as investors digested the impact of six Arab countries including Saudi Arabia having cut diplomatic ties with Qatar.

Back home, investors turned cautious as the Reserve Bank of India (RBI)'s monetary policy committee (MPC) kicked off its two-day policy review meeting, which concludes tomorrow. 
 

At 11:08 am, the S&P BSE Sensex was trading at 31,245, down 64 points, while the broader Nifty50 was ruling at 9,658, down 16 points. 

In the broader market, the S&P BSE Midcap and the S&P BSE Smallcap indices erased morning gains to shed 0.3% and 0.1%, respectively. 

"The Tuesday's session is likely to trade with some volatility on the back of RBI monetary policy. Price-wise, we do not expect any positive surprise from this event and hence, any disappointment may lead to some profit booking in the market. 9,640 – 9,581 would act as a strong support zone on Nifty today," said brokerage Angel Broking in a technical note. 

Sectors and stocks

Nifty IT index (up 2%) was the leading sectoral gainer, led by gains in Tata Elxsi (up 4%), TCS (up 3%), HCL Tech (up 2%), Just Dial (up 2%) and Infosys (up 1%).

SBI gained over 1% after the country’s largest lender launched share sales through private placement to raise about Rs 11,000 crore to shore up its capital adequacy ratio. 

Cadila Healthcare hit a new high of Rs 510, up 4% on BSE after the company received Establishment Inspection Report (EIR) from the US health regulator for its Baddi facility in Himachal Pradesh.

Shares of Adani Enterprises rallied over 6% to Rs 125 after the company gave final investment approval for its controversial $4 billion Carmichael mine and rail project in Queensland.

RBI policy meet begins today

RBI MPC will meet later in the day to review the monetary policy amid slowdown in growth and lower inflation. Brokerage BofA-ML expects the MPC to turn dovish and to be open for a 25 bps cut in interest rates on August 2 if rains are normal. This should signal a much-needed bank lending rate cut before the busy industrial season sets in October.

"Slow growth and soft inflation can surly justify a rate cut on Wednesday itself. Having just shifted its stance to neutral from accommodative, however, the RBI MPC will likely want to wait for clarity on the monsoon and transfer of the "demonetization dividend" (Rs600bn BofAMLe) to the Finance Ministry," said BofA-ML in a report. 

Global markets

Asian stocks retreated on Tuesday after Wall Street's stumble overnight, while oil inched up from the previous day losses as lower Libyan oil production assuaged concerns that the severing of ties with Qatar by other Arab states could impede a deal to cut crude output.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2% in early trade, pulling back from a two-year high hit on Monday.

Japan's Nikkei dropped 0.4%. South Korean markets were closed for a holiday.

Australian shares tumbled 0.9%, while the Australian dollar slipped 0.1% to $0.7481, but retained most of Monday's 0.6% gain ahead of a Reserve Bank of Australia policy decision later on Tuesday where the benchmark rate is expected to be kept at a record low 1.5%.

Overnight, the major Wall Street indexes slipped between 0.1% and 0.2%, with Apple Inc. leading losses on the Dow Jones Industrial Average.

(With inputs from Reuters)