Sensex gives thumbs up to RBI rate hold, monsoon forecast

Mumbai: Buoyed by the RBI's status quo on policy rates and a revised estimate of a good monsoon, the BSE Sensex on Wednesday closed almost 81 points higher at 31,271.28 with sectors like banking and auto making most of the gains.

The strengthening rupee, which closed 10 paise up at 64.33, also pepped up domestic equities.

The central bank left lending rates unchanged citing risks to inflation due to spurt in farm loan waivers by states but raised lending capacity of banks to support economic growth.

RBI Governor Urjit Patel-led MPC for the fourth straight bi-monthly review kept the repo rate unchanged at 6.25 percent. The reverse repo has been kept at 6 percent.

"The market was volatile as the policy decision was consistent with their neutral stance, whereas investor expected a change. The policy will support banks to lend more due to the advantage of 50bps cut in SLR. Moreover, revised estimation of monsoon to 98 percent will increase the consumption patterns which also provide a positive sentiment to investors." Vinod Nair, Head of Research, Geojit Financial Services Ltd said.

The BSE Sensex took off on a positive note at 31,252.71 and advanced to 31,346.99. Later, on profit booking, it slipped to touch a low 31,172.98 before ending 80.72 points, or 0.26 percent, higher at 31,271.28. The gauge had lost 118.93 points in the previous session.

The NSE Nifty too followed suit. After shuttling between 9,678.55 and 9,630.55, it finally settled 26.75 points higher at 9,663.90.

The markets also cheered the Met department's revised monsoon estimate which said that the country will get 98 percent rainfall of the Long Period Average, up from the earlier estimate of 96 percent.

Brokers said the RBI's decision to keep key interest rate unchanged was largely in line with investor expectations.

The central bank left the cash reserve ratio static at 4 percent.

Banking index surged 0.73 percent as shares of state- run SBI rose 1.22 percent to Rs 290.75, followed by ICICI Bank 1.91 percent to Rs 324.75, Axis Bank 0.58 percent to 513.30 and HDFC Bank 0.10 percent to Rs 1,640.55.

The central bank has, however, slashed the Statutory Liquidity Ratio (SLR) or the percentage of deposits that banks have to park in government securities, by 0.5 percent to 20 percent. The move is expected to raise buoyancy in the loans market as banks would have slightly higher funds for lending.

The central bank also cut growth projection for the current fiscal to 7.3 percent from 7.4 percent.

RBI also projects inflation in 2-3.5 percent range for first half of 2017-18 and 3.5-4.5 percent for second half.

Banking index surged 0.73 percent as shares of state- run SBI rose 1.22 percent to Rs 290.75, followed by ICICI Bank 1.91 percent to Rs 324.75, Axis Bank 0.58 percent 513.30 and HDFC Bank 0.10 percent to Rs 1,640.55.

Robust buying in healthcare, metal, financials, auto, energy and FMCG counters spearheaded the recovery momentum. Though skeptical investors booked profits in IT and Teck shares due to future earnings concerns.

Auto sector, which is sensitive to monsoons, surged 0.70 percent. M&M, Eicher Motor, Maruti, HeroMotoCorp and Ashok Leyland were the top gainers of the day, rising by up to 1.49 percent.

However, it was a mixed but quite flat session for other Asian and emerging markets against the backdrop of a crucial UK General Election on Thursday.

Out of the 30-share Sensex pack, 21 scrips rose while 9 declined during the day.

Major gainers were, Reliance 1.96 percent, ICICI Bank 1.91 percent, M&M 1.49 percent, Sun Pharma 1.31 percent, HUL 1.27 percent, SBI 1.22 percent, Maruti 1.22 percent, Gail 1.19 percent, Cipla 1.09 percent and Hero Motoco 0.89 percent.

However, TCS fell by 2.97 percent followed by Wipro 2.10 percent, Infy 1.83 percent, Tata Motors 0.64 percent and Adani Ports 0.59 per cent.

Among BSE sectoral and industry indices, Healthcare rose by 1.08 percent, metal 0.97 percent, energy 0.89 percent, bankex 0.73 percent, auto 0.70 percent, FMCG 0.69 percent and finance 0.61 percent, while IT fell by 1.97 percent and teck by 1.52 percent.

The S&P BSE Mid-Cap index provisionally rose 0.46 percent. The S&P BSE Small-Cap index provisionally advanced 0.75 percent. Both these indices outperformed the Sensex.

The market breadth turned positive as 1,373 stocks ended higher, 1,185 declined, while 153 ruled unchanged.

The total turnover on BSE amounted to Rs 3,515.42 crore, higher than turnover of Rs 3,410.00 crore registered during the previous trading session.