India : Sensex ends flat but Midcap shines; Nifty Bank sinks on CRR hike
Equity benchmarks closed flat with a positive bias after consolidation on Monday but the broader markets outperformed on further value buying. Banks underperformed after CRR hike announcement by RBI while ITC helped the market close in the green.The 30-share BSE Sensex was up 33.83 points at 26350.17 and the 50-share NSE Nifty gained 12.60 points at 8126.90 while the BSE Midcap index jumped 1 percent and Smallcap rose 0.66 percent on positive breadth. About 1658 shares advanced against 936 declining shares on the exchange.
Proprietary sentiment indicator has still not hit the buy zone so there may be some downside in the near term and thus, the recovery from the recent damage to share prices may not be V-shaped, Ridham Desai of Morgan Stanley says.
Jayant Manglik of Religare Securities also says possibility of further decline can’t be ruled out. He feels investors should use this fall to gradually add quality stocks with medium to long term perspective.
Vinod Nair of Geojit BNP Paribas Financial Services says RBI’s future course of actions in the December policy meet including a possible rate cut will be keenly watched.
He feels RBI’s unexpected move to increase the CRR to 100% on incremental deposits is negative for the banks as the additional interest cost will impact their profitability in the medium term. This measure will take away the incremental profitability expected through the yield from parking the excess liquidity into bonds, Nair says.
After this RBI move, Bank Nifty as well as PSU Bank index fell 1 percent and 2.55 percent, respectively. Bank of India, Bank of Baroda, SBI, PNB and ICICI Bank were down 1.6-3 percent while Axis Bank outperformed.
ITC and Nestle gained 2 percent each followed by HUL and Dabur with 0.3-0.5 percent upside despite industry sources told CNBC-TV18 that top FMCG companies are adopting a ‘wait and watch’ mode with regards to new product launches and may defer new launches of high-end, premium products by one-two quarters.
Bharti Airtel was the biggest gainer among Sensex 30 stocks, up 5.5 percent followed by Idea Cellular and Reliance Communications with 2-3 percent upside. Adani Ports, ONGC and Hero Motocorp surged over 2 percent.
Meanwhile, the government today offered a new window for tax evaders to clean, allowing them to declare hidden wealth by paying a 30 percent tax, a 10 penalty and a 33 percent surcharge under a proposed new law.
In the broader space, Sagar Cements surged 15 percent after the company fixed issue price at Rs 800 per share, which is higher than current market price, for preferential issue. ARSS Infrastructure gained 20 percent on order worth Rs 51.44 crore from North Central Railway, Jhansi. Nagarjuna Oil jumped 8 percent as it sought shareholders’ approval for sale of shares held by company in Nagarjuna Oil Corp.
On the global front, European stocks were lower amid continued political uncertainty in Italy and fading hopes of an OPEC production cut which pushed oil prices lower. France’s CAC, Germany’s DAX and Britain’s FTSE were down 0.3-0.5 percent at the time of writing this article. Asia ended mixed as dollar strength weighed.
