Indian stocks came off intra-day highs on Tuesday as savvy traders preferred to stay light a day ahead of the Reserve Bank of India’s statement on monetary policy. Low volumes characterized dull trade as traditional sectors such as FMCG came under selling pressure. Banks were quiet.
The Nifty rose 14 points to close at 8,143, retreating from a high of 8,178 in the last one hour of trade. It was the second day of gains even as the 51-share index found it difficult to negotiate the 8,150-point resistance on the charts. Tata Power, HDFC, Idea Cellular, BPCL and Adani Ports rose between 1.3-2.8 percent and were among 31 gainers on the Nifty. On the losing side were Bharti Infratel, Bosch, HCL Technologies, Maruti and Power Grid. They dropped between 1.3-2.3 percent and were among 20 shares that slipped on the index.
The Sensex closed 44 points higher at 26,393 points on the Bombay Stock Exchange.
Banking stocks saw hectic trade, in particular State Bank of India ahead of the central bank’s bi-monthly statement on its monetary policy stance. Market men expect RBI Governor Urjit Patel to cut lending rates by between 25-50 basis points in a bid to stoke credit demand in the economy and help lenders combat a rising tide of non performing assets. Several banks came off day’s highs as traders hedged bets on the outcome of the policy. A 25 basis points cut in lending rates is already priced into stocks. The Bank Nifty, meanwhile, ended flat at 18,421 points.
Banks are also seeking direction from the central bank after the government’s surprise move to demonetize 1,000-rupee and 500-rupee notes, on November 8, lead to a surge in deposits totalling more than 12 lakh crore rupees. Prime Minister Narendra Modi has asked all citizens to deposit such notes, amounting to 86 percent of currency in circulation, in a bid to exhume black money from the economy.
Banks have worked overtime in the past 5 weeks to tackle an unprecedented rush to exchange these notes and are now flush with cash in an economy where credit offtake is in low single digit percentage.
Meanwhile, stocks in sectors such as non-banking finance companies, power, realty and metals gained modest ground. Strong gains were seen in Bharat Forge, Federal Bank, Siemens, Bata India and Petronet LNG.
Overall, the bulls retained control of sentiment on Dalal Street with 833 shares advancing compared to 611 that fell on the National Stock Exchange.
Crompton Greaves came under intense selling pressure on news that the company has extended for the second time the time frame for the planned sale of its power division. The stock fell as much as 5.5 percent intra-day but closed 3.1 percent lower at 66.25 rupees. It was the most actively traded stock on the NSE by quantity with 2.92 crore shares changing hands.