A bout of volatility was witnessed in early afternoon trade as key benchmark indices trimmed gains after extending gains and hitting fresh intraday high after Reserve Bank of India (RBI) said after its monetary policy review that stance of monetary policy remains accommodative. At 12:17 IST, the barometer index, the S&P BSE Sensex was up 131.54 points or 0.49% at 26,908.99. The Nifty 50 index was currently up 43.65 points or 0.53% at 8,244.70. Firmness in Asian stocks supported gains on the domestic bourses.
The Sensex rose 166.86 points or 0.62% at the day's high of 26,944.31 in early afternoon trade, its highest level since 3 June 2016. The index gained 52.08 points or 0.19% at the day's low of 26,829.53 at the onset of the trading session. The Nifty rose 52.45 points or 0.63% at the day's high of 8,253.50 in early afternoon trade, its highest level since 3 June 2016. The index rose 15.35 points or 0.18% at the day's low of 8,216.40 in morning trade.
In overseas markets, Asian stocks rose today, 7 June 2016 after Federal Reserve Chairwoman Janet Yellen yesterday, 6 June 2016 said US interest rate hikes are likely on the way but held back any reference to the timing. The Fed chief said last month's jobs report was "disappointing" and bears watching, though she gave a largely upbeat assessment of the US economic outlook, warning against attaching too much significance to the payrolls data in isolation. Uncertainty in timing of further hikes in Fed rate would support emerging market assets as investors have less incentive to draw out money from these markets in their search for higher yields in the US.
US stocks gained yesterday, 6 June 2016, even as Federal Reserve Chairwoman Janet Yellen said a rate-hike following an ugly jobs report late last week was still a possibility. The Federal Open Market Committee next undertakes monetary policy review on 14-15 June 2016.
Closer home, the market breadth indicating the overall health of the market was positive. On BSE, 1,348 shares rose and 930 shares declined. A total of 136 shares were unchanged. The BSE Mid-Cap index was currently up 0.36%, underperforming the Sensex. The BSE Small-Cap index was currently up 0.65%, outperforming the Sensex.
Telecom stocks gained. Bharti Airtel (up 0.16%), Tata Teleservices (Maharashtra) (up 0.16%) Reliance Communications (up 0.1%) and Idea Cellular (up 0.24%) gained.
Shares of Bharti Infratel fell 0.48%. Bharti Infratel is a provider of tower and related infrastructure and is a unit of Bharti Airtel.
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Cement stocks also gained. ACC (up 0.2%), Shree Cement (up 0.73%), Ambuja Cements (up 0.37%), and UltraTech Cement (up 2.21%) gained.
Grasim Industries advanced 0.84%. Grasim has exposure to the cement sector through its holding in UltraTech Cement.
Prism Cement rose 1.71% after the company agreed to acquire 15.23% stake in BLA Power which is in the business of generating thermal power. The announcement was made after market hours yesterday, 6 June 2016. Prism Cement will acquire 15.23% equity stake in BLA Power for approximately Rs 21 crore. Prism Cement will also enter into a power supply agreement (PSA) with BLA Power for the purchase and consumption of 25 megawatts (MW) of RTC (Round The Clock) power from BLA Power for its two cement plants at Satna in Madhya Pradesh. This is expected to reduce the cost of cement production for the two cement units at Satna.
Meanwhile, as widely expected RBI kept policy rates unchanged after its monetary policy review today, 7 June 2016. The RBI after its monetary policy review said that on the basis of an assessment of the current and evolving macroeconomic situation, it has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5%. The RBI has also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL) and said it will continue to provide liquidity as required but progressively lower the average ex ante liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality. Consequently, the reverse repo rate under the LAF will remain unchanged at 6%, and the marginal standing facility (MSF) rate and the bank rate at 7%.
In its bi-monthly monetary policy statement of April 2016, the RBI had stated that it would watch macroeconomic and financial developments in the months ahead with a view to responding as space opens up. RBI said that incoming data since then show a sharper-than-anticipated upsurge in inflationary pressures emanating from a number of food items (beyond seasonal effects), as well as a reversal in commodity prices. A strong monsoon, continued astute food management, as well as steady expansion in supply capacity, especially in services, could help offset these upward pressures. Given the uncertainties, the Reserve Bank will stay on hold, but the stance of monetary policy remains accommodative, RBI said. The RBI will monitor macroeconomic and financial developments for any further scope for policy action.
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