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Markets reversed early losses shrugging off RBI's neutral stance on key policy rates to end higher on Monday, owing to buying in index heavyweights. Tuesday saw the markets snapping two days of gains as investors turned cautious and booked profit in financials ahead of the US Fed meet. The indices recorded their steepest fall since February 27, 2012 after comments by the US Fed that it would start pruning its monetary stimulus measures sooner-than-expected and weak China manufacturing data led to a sell off in global equities on Thursday. Investors preferred to buy technology stocks amid optimism that the weak rupee would improve profitability going ahead, healping markets to gain on Friday.
In the mid-quarter review of the monetary policy held on Monday, the Reserve Bank of India (RBI) kept key policy rates and the Cash Reserve Ratio (CRR) unchanged. However, the guidance given was that “a durable receding of inflation” will open up space for further easing of the monetary policy. The repo rate stands at 7.25% while the reverse repo rate stands at 6.25%. The CRR remains at 4% of banks Net Demand and Time Liabilities (NDTL).
The guidance given by the central banks was that the monetary policy stance will be determined by how growth and inflation trajectories and the balance of payments situation evolve in the months ahead.
According to recent data, exports fell 1.1% to $24.5 billion in May this year compared to $24.7 billion in the same month last year, official data showed today. Imports, on the other hand, rose 6.9% to $44.64 billion against $41.7 billion over the period. Despite government raising import duty on gold to 8% from 6%, import of yellow metal almost doubled to $8.4 billion in May from $4.4 billion.
Further, the rupee which slumped to Rs 59.27 also dampened investor sentiment as it would force the Reserve Bank of India to defer easing of key policy rates.
Asserting that Rupee is not in 'shambles', Finance Ministry today said the government, RBI and Sebi are alert to the situation and will take actions as warranted.
JSPL was the top loser of the week, down over 15%. The Central Bureau of Investigation (CBI) yesterday questioned Jindal Steel & Power Limited (JSPL) chairman and Congress member of Parliament Naveen Jindal.
M&M group stocks rallied after it bought 13.5% stake in CIE Auto.
Hindalco declined by nearly 10%. Other losers were ICICI Bank, HDFC Bank and NTPC, all dropping between 4-6%.
Telecom shares gained during the week as Telecom Regulatory Authority of India (TRAI) announced reduction in the national mobile phone roaming charges.
Shares of frontline non-banking finance companies (NBFC’s) like Mahindra and Mahindra Financial Services, Bajaj Finserv, Reliance Capital, L&T Finance Holdings rallied up to 8% during mid-week in anticipation of getting banking licenses
