Equities surged to their new all-time high on Tuesday, although with caution, after Reserve Bank of India (RBI) left key policy rates unchanged but sounded more hawkish with its future policy stance, thereby, prompting traders to book profit in banking and rate sensitives and slowing down share purchases of foreign institutional investors (FIIs).
FIIs net bought shares worth $64.27 million in the cash market on Tuesday was the lowest single-day purchase in a month, provisional data from stock exchanges showed. Overseas funds had bought $31.23 million on March 4 this year. Overall, FII buyings crossed the $4-billion mark on expectations of a recovery in the domestic economy, and bets that the Bharatiya Janata Party (BJP), perceived as more business-friendly, will come to power.
Leif Eskesen, chief economist India & Asean at HSBC, said that while RBI kept policy rates unchanged as expected, the central bank was not upbeat about the domestic economy and saw downside risks to its 5.5% growth forecast for FY15.
?The tone of RBI?s commentary was one of caution, emphasising the potential upside pressures on retail inflation. We think the move of reducing banks? LAF repo borrowing limit (at 8%) and to switch the same to term repos (at 8-9%, based on auctions) will lead to a marginal tightening in near-term interest rates,? said Barclays? analysts Siddhartha Sanyal and Rahul Bajoria in the research note.
Amid a volatile trade, the Sensex advanced 60.17 points or 0.27% to close at a new high of 22,446.44 led by gains in technology and consumer durables companies. However, gains were limited as traders booked profit in banking and rate sensitives for the second session in succession, after having gained 3-7% in last one week.
Nifty rose 16.85 points or 0.25% to end at a record high of 6721.05 after declining 0.5% in afternoon trade. The lacklustre mood was visible in broader markets with the mid and small-cap indices ending up flat-to-positive.
ICICI Bank fell nearly 2% and HDFC Bank was down 1.5%. Largest public sector lender State Bank of India lost 1.24%, leading the gauge of banking stock down by 1.2%. Hindaclo Industries was the biggest loser on Tuesday, with the scrip falling over 2.5%. Car maker Maruti Suzuki ended down 2.04%.
Heavy electric equipment maker Bharat Heavy Electrical lost 1.32%.
BSE Realty index lost 0.85%. The BSE Capital Goods index settled 0.3% lower after losing nearly 1.5% in the intraday trade. Larsen & Toubro recovered intra-day losses to end 0.3% higher.
Market breadth was strong with 16 of the 30 Sensex companies ending in the green. Overall, 1,546 stock advanced on the BSE compared with 1,158 stock that ended in the red.
Experts opined the market momentum continues to be strong and every correction is a buying opportunity from a long-term perspective. The Street is watching key economic releases such as the industrial production, trade and inflation data in next fortnight, and the outcome of various opinion polls and exit polls, which will be announced on May 16, they said.
