Markets notched marginal gains and closed off day’s high as sentiment turned jittery after the RBI reiterated that anti-inflationary stance would persist, even at the cost affecting growth after hiking rates by 25 bps, in line with expectation.
The Sensex ended higher by 57 points at 16,934, while the Nifty advanced 9 points, at 5,084.
Earlier, the markets opened on a positive note after central banks around the world pledged to pump in liquidity into the system. The Nifty touched a high of 5,143 around noon and gave up all the gains, touching a low of 5,068 after the rate hike announcement and the continued hawkish stance of the central bank. The markets recouped most of the losses, and ended the day slightly higher on concerns of more rate hikes.
Sudhakar Shanbhag, Chief Investment Officer from Kotak Mahindra Old Mutual Life Insurance said, "The increase in repo rate by 25 bps each is largely in line with the market expectation. The RBI will watch the impact of rate increases on the inflation trajectory and implications of global developments to change its course."
Going forward, markets will take cues from the development in Europe and the United States, where the Federal Reserve Meeting at end of September will be crucial. "Buoyant crude prices are a point of concern; any developments on the reforms front will be a positive for the markets. We continue to recommend a stock specific approach with a medium to long term," said Dipen Shah, Head Fundamental Research from Kotak Securities.
In the international markets, all the Asian indices closed in the positive territory with the exporter and financial shares leading the gains. The South Korea’s Seoul Composite and Taiwan Weighted index leading the gains, up 3-4% each. The Hang Seng and the Nikkei Stock Average advanced 1-2% respectively. However, the Shanghai Composite index closed flat, up 0.1%.
The European markets also extended Thursday’s gains ahead of Euro-zone finance ministers meet in Poland to discuss the debt crisis. The DAX and the FTSE were up 0.4-0.7% each, while the CAC gave up all the gains and was down 0.3%.
Back in India among the sectoral indices, FMCG and IT indices were the prominent losers, down nearly 1% each.
Profit booking was seen in IT shares as the Rupee recovered. Top losers from the IT pack were HCL Technologies, Wipro, TCS and Infosys, down between 1-4% each.
On the Sensex, Tata Motors moved up 7% at Rs 161. Other prominent gainers were ONGC, Sterlite Industries and State Bank of India, up 3-6% each.
PSU and Realty indices were the major gainers, up almost 2% each. From the PSU space, NMDC was up over 6%, followed by J&K Bank and NTPC, up around 5% each.
From the PSU space, ONGC rallied 6% to Rs 863 after the follow-on-public issue valued at Rs 4,000 crore was differed because of the pricing disagreement and weak market conditions.
From the realty sector, Parsvnath Developers gained 7%, HDIL and Indiabulls Real Estate advanced 5% and 3% each.
The major losers on the Sensex were Hindustan Unilever, Wipro and BHEL, down 1-3% each.
The market breadth was negative as 1460 stocks declined, while 1337 stocks advanced on the BSE.
