Policy Impact: Markets off day's high

After a knee jerk reaction to the RBI policy announcemet, wherein the markets rallied to higher levels led by rate sensitives, the markets have now pared most of their gains and the banks are weighing it down. The Sensex rallied to a high of 19,341, but is now up 80 points at 19,233. The NSE Nifty is up 24 points at 5,767.

The Reserve Bank of India hiked repo and reverse repo rates by 25 basis points in order to control the inflation. The repo rate or short term lending rate now stands at 6.5% and the reverse repo rate or the borrowing rate is at 5.5%. Cash reserve ratio has been kept unchanged at 6%. RBI also hiked the inflation projection for FY11 to 7% from 5.5% earlier.

NTPC was the top gainer on the Sensex followed by Hindalco, Sterlite Industries, Larsen & Toubro, Tata Steel, Hero Honda, Bharti Airtel and HDFC. On the other hand ICICI Bank, HDFC Bank, Tata Motors, Mahindra & Mahindra, ONGC and JP Associates were the losers.

Banking stocks which traded flat prior to the policy announced, shot up post the anouncement but the momentum was short lived and soon fell prey to the selling pressure and slipped into the red. The BSE banking index - Bankex touched a high of 12,775, but has now shed 116 points or 0.9% at 12,529.

Other rate sensitives like Auto and Realty indices which touched highs of 9456 and 2550 respectively, fell from the highs and were at 9393 and 2522. While BSE capital goods index was the top sectoral gainer, the index added 137 points or 1% and was at 13,806. Consumer Durables, Metal, Oil & Gas, PSU and Teck indices were also higher by 0.6-0.9% each.

Larsen & Toubro was the top gainer among the capital goods stock, the stock added 1.8% and was at Rs 1692. Siemens, Gammon India, Areva T&D, AB, BHEL, BEML and Havells were also among the top gainers. ICICI Bank, HDFC Bank, Punjab National Bank, Bank of India, Union Bank, Yes Bank and Axis Bank were among the top osers on the banking charts.

The broader markets were also flat in the noon deals, the BSE mid-cap index was at 7266 up 14 points and the small-cap index was at 9050 up 33 points.