RBI surprise leaves market ending the week in green - Eastern Financiers

Markets ended a volatile week of trade marginally in the green, despite the much feared tapering of bond buying program by the US Federal reserve being announced, as the RBI surprised the markets by holding interest rates status-quo. Nifty ended the week at 6277.20, up 108.80 points or 1.76 percent and Sensex shut shop at 21079.72, up 364.14 points or 1.75 percent. Sectoral indices were mixed in nature with more gainers than losers. The twin negative developments in the form of start of monetary stimulus tapering and spike in the WPI created jitters amongst market participants as they sold equities, taking indices lower during the early part of the week. However, the RBI's move to give a benefit of doubt to the inflation spike to be an one-off affair, helped markets recover from their lows and register moderate gains. The other important data that was followed closely by investors was the Q3FY14 advance tax figures of India inc, which were mixed in nature.

The Wholesale Price Index (WPI) inflation, that came in early this week, showed that price rise for the month of November stood at 7.52% versus 7% in October. The WPI for the month of September was also revised upwards to 7.05% versus 6.46% provisional. The primary articles inflation for November rose to 15.92% versus 14.68% in October. While the manufactured products inflation rose to 2.64% versus 2.50% in October, the Fuel & Power inflation also exhibited a rise to 11.08% versus 10.33% in October. The food inflation rose to a whopping 19.93% versus 18.19% in October. The markets reacted negatively to the inflation data.

However, the RBI chose to talk tough but not take any action in its mid-quarter monetary policy review. The RBI's decision to keep the repo, reverse-repo & CRR unchanged, surprised investors, who had widely expected the central bank to hike the CRR after raising it by a quarter percentage point each at its previous reviews in September and October. Instead, the RBI noted that prices of vegetables, which are driving the inflation rate higher, are easing, while highlighting "the weak state" of the economy and the uncertainty posed by a possible withdrawal in U.S. monetary stimulus. However, the central bank described it's decision as "a close one" and said it would remain vigilant on inflation, acting between policy reviews should headline or core inflation not ease as expected.

On the sectoral front, the Cabinet Committee on Economic Affairs ( CCEA) approved interest-free loan for the ailing sugar industry to pay off cane arrears. The interest amount would be paid by the Centre and through the Sugar Development Fund. Hailing the decision, Indian Sugar Mills Association (ISMA) said "It's a wonderful gesture by the Union government for farmers and the industry at the same time. The loans will ensure timely payment to farmers to that extent at least, including the clearance of past cane arrears of Rs.3,000 crore."

Source : Equity Bulls

Keywords