Sensex closes flat; bank stocks fall

A benchmark index of Indian equities markets closed Monday's trade flat a day ahead of the Reserve Bank of India's fourth bi-monthly policy review.

The benchmark index closed the day's trade 29.21 points or 0.11 percent down as interest sensitive stocks like banks, metal and auto declined over anxiety regarding the Reserve Bank's decision.

However, healthy buying was observed in healthcare, information technology (IT) and consumer durables sectors.

The 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 26,694.41 points, closed trade at 26,597.11 points, down 29.21 points or 0.11 percent from the previous day's close at 26,626.32 points.

The Sensex touched a high of 26,715.77 points and a low of 26,518.01 points in the intraday.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) too closed the day's trade flat. It closed 9.95 points or 0.12 percent down at 7,958.90 points.

With inflation still high, the RBI is unlikely to cut interest rates.

Consumer price index (CPI) based retail inflation eased to 7.8 percent in August from 8.59 percent in April. Wholesale price index (WPI) inflation has also eased to 3.74 percent in August from 5.55 percent at the start of the current fiscal.

The RBI headed by the monetarist-inclined Governor Raghuram Rajan has set a target for CPI inflation at 8 percent by January 15 and 6 percent by January 2016.

The RBI left key interest rates unchanged in its third bi-monthly monetary policy review early August, saying near-term tightening is not expected if inflation continues to ease.

The repo rate, or the interest that banks pay when they borrow money from the RBI to meet their short-term fund requirements, was left unchanged at 8 percent.

The reverse repo rate, or the interest that the RBI pays to commercial banks when they park their surplus short-term funds with the central bank, had been adjusted to 7 percent.

The Cash Reserve Ratio (CRR) was left unchanged at 4 percent. The marginal standing facility rate and the Bank Rate were also kept unchanged at 9 percent.

The statutory liquidity ratio (SLR), the mandatory amount of bonds lenders must keep with the RBI, was cut by 0.5 percent to 22.0 percent of their net demand and time liabilities (NDTL) with effect from August 9, 2014.

The major Sensex gainers were: Sun Pharma, up 3.36 percent at Rs.834.20; Tata Consultancy Services (TCS), up 3.17 percent at Rs.2,768; Gail, up 2.36 percent at Rs.454; Infosys, up 1.90 percent at Rs.3,751.10; and Hindalco Inds, up 1.33 percent at Rs.159.50.

The losers were: Sesa Sterlite, down 1.65 percent at Rs.270.45; Tata Steel, down 1.61 percent at Rs.466.55; Coal India, down 1.48 percent at Rs.342.85; ITC, down 1.44 percent at Rs.366.40; and Bajaj Auto, down 1.42 percent at Rs.2,303.70.

Among the Asian markets, Japan's Nikkei closed 0.50 percent up. China's Shanghai Composite Index was higher by 0.43 percent. However, Hong Kong's Hang Seng was down 1.90 percent.

In Europe, London's FTSE 100 was trading 0.35 percent down. Germany's DAX Index was lower by 0.65 percent, and the French CAC 40 Index dipped by 0.65 percent at the closing bell here.