Markets trade firm on rate cut hopes

BSE Bankex index leads the gains

The markets continued to trade positive in late noon deals and touched new highs, led by financials as the disappointing April IIP data rekindled hopes of a rate cut by the central bank at its policy meet on June 18. The Sensex is currently at 16,739, up 71 points and the Nifty is at 5,077, up 23 points.

Earlier in the day, the BSE benchmark index touched the day's high at 16,743 and the day's low at 16,554.

April IIP growth was at 0.1%. The cumulative growth for the period April-March 2011-12 stands at 2.8% over the corresponding period of the previous year. Capital goods saw the biggest contraction of 16.3%.

Meanwhile, the rupee fell further to 55.91, down 17 paise, against the dollar on persistent demand for the American currency from banks as it firmed against other currencies as well amid weak equity markets. The rupee resumed lower at 55.80 per dollar as against the last closing level of 55.74 at the Interbank Foreign Exchange (Forex) Market.

In Asia, Japan's Nikkei share average fell on Tuesday, taking back half of Monday's gains as a promised bailout for Spanish banks left investors unconvinced that financial contagion would be contained, and doubts about the euro zone's future crept back. The index is at 8,537, down 1%. The Shanghai Composite and Hang Seng indices have declined 0.4-0.8% each.

Back home, on the sectoral front, rate sensitive sector stocks have recovered from the intra-day low levels on hopes that the Reserve Bank of India (RBI) may cut policy rates after index for industrial production (IIP) for April grew lower than expected by just 0.1%.

Banking, realty and auto indices were in the red before the announcement of the IIP data. However, they have showcased a recovery on hopes that Reserve Bank of India (RBI) will cut the key rates given the flat IIP numbers.

BSE Bankex, Consumer Durables, Capital Goods and Realty indices are leading the gains, up 1% each.

BSE FMCG, Healthcare and Power indices are the ones in the negative terrain.    

On the Sensex, Sterlite Industries, Larsen & Toubro, HDFC Bank, SBI and Maruti Suzuki are prominent gainers, up 1-2% each. Maruti Suzuki today said its Japanese parent Suzuki Motor Corporation's stake in the company will go up to 56.2% following merger of Suzuki Powertrain with India's largest carmaker. "The Board of Directors of Maruti Suzuki India (MSI) today approved a proposal to merge Suzuki Powertrain India Ltd (SPIL) with MSI," the company said in a statement.

The losers from the space are Dr Reddy's Labs, Wipro, Hindustan Unilever, Tata Power and ITC, down 1-2% each.

Among individual stocks, DLF is trading higher by 2% at Rs 195.4, bouncing back over 3% from its intra-day low, after the real estate major's arm sold its entire stake in Adone Hotels and Hospitality for Rs 567 crore. “The company’s wholly-owned subsidiary, DLF Hotel Holdings, has divested its entire shareholding in Adone Hotels and Hospitality Limited (Adone) for Rs 567 crore,” DLF said in a filing to the stock exchanges.

HCL Technologies has dipped over 1.3% at Rs 476, extending its previous day’s around 3% fall on buzz that the information technology (IT) service provider is heading for top management change after its CEO, Vineet Nayar sold his entire stake in the company. Nayar had sold 2.7 million equity shares of Rs 2 each or 0.39% stake of the company for Rs 134 crore, on June 7. After the transaction, his shareholding in the company has become nil.

The overall market breadth is negative as 1,236 stocks have declined against 1,105 advancing ones, on the BSE.