Market turns volatile as RBI maintains status-quo on policy rates

Volatility struck bourses in mid-morning trade as the key benchmark indices cut losses soon after extending losses after the Reserve Bank of India (RBI) kept its benchmark lending rate viz. the repo rate unchanged at 6.5% after a policy review. At 11:15 IST, the barometer index, the S&P BSE Sensex, was off 67.40 points or 0.24% at 28,115.17. The Nifty 50 index was currently off 24.80 points or 0.28% at 8,686.55. The RBI announced the outcome of the monetary policy review at around 11:00 IST.

The Sensex fell 126.01 points or 0.45% at the day's low of 28,056.56 in mid-morning trade, its lowest level since 5 August 2016. The barometer index rose 107.39 points or 0.38% at the day's high of 28,289.96 at onset of trading session, its highest level since 10 August 2015. The Nifty fell 40.10 points or 0.46% at the day's low of 8,671.25 in mid-morning trade, its lowest level since 5 August 2016. The index rose 17 points or 0.2% at the day's high of 8,728.35 at onset of trading session, its highest level since 16 April 2015.

The market breadth indicating the overall health of the market was negative. On BSE, 1,203 shares fell and 1,010 shares rose. A total of 108 shares were unchanged. The BSE Mid-Cap index was currently off 0.21%. The BSE Small-Cap index was currently off 0.18%. The fall in both these indices was lower than the Sensex's decline in percentage terms.

The Reserve Bank of India (RBI) also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL). The central bank said it will continue to provide liquidity as required and will progressively lower the average ex ante liquidity deficit in the system from 1% of NDTL to a position closer to neutrality.

RBI said that the recent sharper-than-anticipated increase in food prices has pushed up the projected trajectory of inflation over the rest of the year. The central bank also said that the strong improvement in sowing on the back of the monsoon's steady progress, along with supply management measures, augers well for the food inflation outlook. According to the central bank, risks to the inflation target of 5% for March 2017 continue to be on the upside.

The RBI has retained the projected GVA growth projection for 2016-17 at 7.6%. According to the central bank, the risk to this projection is evenly balanced. The central bank expects the momentum of growth to be quickened by the normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to consumption spending that can be expected from the disbursement of pay, pension and arrears following the implementation of the 7th CPC's award. The passage of the Goods and Services Tax (GST) Bill augurs well for the growing political consensus for economic reforms. While timely implementation of GST will be challenging, its implementation will raise returns on investment across much of the economy and also strengthen government finances over the medium-term, according to the central bank.

In overseas stock markets, most Asian shares rose as US crude oil traded near its highest price in two weeks. US stocks closed lower yesterday, 8 August 2016, after touching record highs as Wall Street caught its breath in the wake of last week's upbeat jobs data.

Telecom stocks saw mixed trend after the government's announcement that the next telecom spectrum auction will be conducted in September 2016. Bharti Airtel (up 0.34%) and MTNL (up 0.25%) rose. Tata Teleservices (Maharashtra) (down 0.62%) and Reliance Communications (down 1.27%) fell.

The Government has decided to allot the right to use certain spectrum for 20 years through spectrum auction in September 2016. A single auction will be conducted in Simultaneous Multiple-Round Ascending (SMRA) format for 7 bands i.e. 700MHz, 800MHz, 900MHz, 1800MHz, 2100MHz, 2300MHz and 2500MHz bands together. The total quantity of spectrum put to auction is 2354.55 MHz. This includes 197 MHz of additional spectrum in 1800 MHz band and 37.5 MHz in 800 MHz band released due to harmonization of spectrum in these bands. The option of making payment either full upfront or through deferred payment option has been retained.

Idea Cellular dropped after the company announced weak Q1 results. The stock lost 4.95% to Rs 98. The stock hit a low of Rs 96.55 so far during the day, which is a 52-week low for the counter. The stock hit a high of Rs 99.50 so far during the day. The company's consolidated net profit slumped 74.21% to Rs 220.41 crore on 7.22% rise in total income to Rs 9552.44 crore in Q1 June 2016 over Q1 June 2015. The result was announced after market hours yesterday, 8 August 2016.

Idea Cellular said it remains confident to tap all emerging opportunities in mobile voice and broadband businesses.

Shares of Bharti Infratel rose 1.1% to Rs 385.35. The stock turned ex-dividend today, 9 August 2016, for final dividend of Rs 3 per share for the year ended 31 March 2016 (FY 2016). Before turning ex-dividend, the stock offered a dividend yield of 0.78% based on its closing price of Rs 381.15 on the BSE yesterday, 8 August 2016.

Bharti Infratel is a provider of tower and related infrastructure and is a unit of Bharti Airtel.

Interest rate sensitive auto stocks declined after the Reserve Bank of India (RBI) kept the policy repo rate unchanged at 6.5% after a monetary policy review. DLF (down 1.18%), Indiabulls Real Estate (down 1.65%), Housing Development and Infrastructure (down 0.74%), Unitech (down 2.54%), Sobha (down 0.36%), Godrej Properties (down 1%), Oberoi Realty (down 1.27%) fell. Parsvnath Developers (up 1.47%) and D B Realty (up 0.28%) rose.

Purchases of both residential and commercial property are largely driven by finance.

Meanwhile, the amended goods and services tax (GST) constitutional amendment bill was passed by the Lok Sabha yesterday, 8 August 2016. The bill was passed by the Rajya Sabha last week. Prime Minister Narendra Modi in Lok Sabha said that with GST, the government intends to bring uniformity in taxation. Most of the things that can impact consumer inflation have been kept out of the ambit of GST, Modi said. He was intervening during the debate in the Lok Sabha on the GST Bill yesterday, 8 August 2016. The government plans to implement the nationwide GST from 1 April 2017. The main objective of the GST is to eliminate excessive taxation. GST is a uniform indirect tax levied on goods and services across a country. The measure would harmonize 11 state and central levies into a national sales tax, reducing business transaction costs.

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