Markets end marginally higher

Defensive stocks amongst the worst hit

Markets trimmed most of their early gains to end marginally higher on Monday, extending gains for the ninth straight session, amid profit taking in rate sensitive shares after RBI maintained neutral stance on key policy rates. Profit taking was also seen in FMCG and IT sector stocks. The Sensex closed higher by 78 points at 18,542 and the 50-share Nifty advanced 32 points to close at 5,610 levels.

The markets started off on a strong note in trades today and Nifty touched its 52-week high of 5,652 after the cabinet committee on political affairs (CCPA) on Friday post the market hours gave a go ahead to the much awaited economic reforms such as clearing 51% foreign direct investment (FDI) in multi-brand Reteail, FDI in Aviation sector and divesting stake in four public-sector undertakings (PSU) namely Oil India, MMTC, National Aluminum Company (NALCO) and Hindustan Copper.

Meanwhile, the European markets were trading lower as investors took a breather following a sharp two-week rally and a key indices hitting a strong resistance level, although the retreat could be short-lived as recent central bank moves boost risk appetite. The CAC40, DAX and FTSE were down 0.2-0.4% each.

The Asian markets also ended on a mixed note. The Shanghai Composite slipped 2.1% to close at 2,078 while the Hang Seng advanced 0.1% to end at 20,658 levels.

Back home, taking a cautious stance, the Reserve Bank today cut CRR by 0.25% - the percentage of deposits banks keep with central bank - but refrained from reducing lending rates in view of high inflation.

The RBI decision, which comes days after a slew of measures taken by the government to push growth, will release Rs 17,000 crore of primary liquidity into the system.

Following this decision the rate sensitive sector stocks witnessed buying in trades today. The BSE realty sector surged 6.2% or 101 points to end at 1,734 levels. capital goods, bankex and power indices also closed higher by 2.2-3.7% each.

ICICI Bank, SBI, Larsen & Toubro, BHEL, Hero MotoCorp, Tata Motors, Mahindra & Mahindra, HDFC, Tata Power, NTPC and Maruti Suzuki from the rate sensitive sectors were the top gainers among the Sensex stocks, they advanced by 1-5% each in trades today.

Oil & gas, metal, PSU and consumer durable indices also closed higher by 1-2% each.

At the same time, defensive sector stocks such as pharma and FMCG witnessed a sharp sell-off ended weaker by over 1% each, on profit taking at higher levels after recent gains, as the reform measures announced by the government will favour cyclical and high beta stocks.

ITC, Dr Reddy's Labs, HUL and Sun Pharma were the top losers on the Sensex slipping 1-5.5% each.

Shares of information technology (IT) companies were under pressure with most of the frontline stocks trading lower by over 2% each after the rupee rallied to 4-month high. The rupee has appreciated almost 3% in past two trading sessions.
 TCS, Infosys and Wipro slipped 3-5% each.

Shares of Anil Dhirubhai Ambani (ADAG) led Reliance group companies - Reliance Infrastructure (R-Infra), Reliance Power, Reliance Capital and Reliance Communication have rallied more than 5% each on back of huge volumes.

Deccan Chronicle Holdings was locked at lower circuit of 5% to Rs 10.36 ahead of the Bombay High Court (HC) verdict on the Board of Control for Cricket in India (BCCI) decision to terminate the contract of IPL team Deccan Chargers.

Shares of companies engaged in retail, aviation and cable operating business rallied  after the cabinet approved the foreign direct investment (FDI) in these sectors.

On Friday, after market hours, the Cabinet approved 51% FDI in local multi-brand retail industry, ended a ban on local carriers selling stakes to overseas airlines and allowed foreign investors to acquire as much as 74% in cable television and direct-to-home operators.

The broader markets outperformed the benchmark indices. The BSE mid-cap and small-cap indices advanced 1% each compared to 0.4% rise in the Sensex.

The overall breadth was positive as 1,628 stocks advanced while 1,263 declined.