Investors cheered the Reserve Bank of India's (RBI) surprise announcement of a cut in its main lending rate viz. the repo rate by 25 basis points in an unscheduled review today, 15 January 2015, as key equity benchmark indices extended intraday gains in early afternoon trade. The barometer index, the S&P BSE Sensex, hit its fresh highest level in more than a week and the 50-unit CNX Nifty hit its fresh highest level in more than five weeks. The Sensex was currently up 612.87 points or 2.24% at 27,959.69. The market breadth indicating the overall health of the market was strong. The BSE Mid-Cap index was up 1.29%. The BSE Small-Cap index gained 1.14%. Trading in US equity index futures indicated a firm opening of US stocks later in the global day today, 15 January 2015.
Auto stocks rose after the Reserve Bank of India's (RBI) surprise announcement of a cut in its main lending rate viz. the repo rate by 25 basis points in an unscheduled review today, 15 January 2015. Capital goods stocks also rose.
State-run United Bank of India announced a 25 basis points reduction in its base rate after the RBI's surprise repo rate cut. The bank cut its base rate to 10% from 10.25% with effect from 1 February 2015.
Foreign portfolio investors sold shares worth a net Rs 69.74 crore yesterday, 14 January 2015, as per provisional data.
In overseas markets, Asian stocks rose after India cut interest rates. US stocks fell in choppy trading session yesterday, 14 January 2015, after surprisingly weak December retail sales data, which cast doubt on the pace of economic growth in the world's biggest economy.
In the foreign exchange market, the rupee strengthened past 62 against the dollar after the Reserve Bank of India's (RBI) surprise announcement of a cut in its main lending rate viz. the repo rate by 25 basis points in an unscheduled review today, 15 January 2015.
Brent crude futures edged lower after staging a rebound during the previous trading session.
At 12:18 IST, the S&P BSE Sensex was up 612.87 points or 2.24% at 27,959.69. The index jumped 637.32 points at the day's high of 27,984.14 in early afternoon trade, its highest level since 5 Janaury 2015. The index rose 356.88 points at the day's low of 27,703.70 in early trade.
The CNX Nifty was up 179.70 points or 2.17% at 8,457.25. The index hit a high of 8,468.95 in intraday trade, its highest level since 8 December 2014. The index hit a low of 8,380.55 in intraday trade.
The BSE Mid-Cap index was up 134.86 points or 1.29% at 10,606.77. The BSE Small-Cap index was up 127.90 points or 1.14% at 11,328.98. Both these indices underperformed the Sensex.
The market breadth indicating the overall health of the market was strong. On BSE, 1,581 shares advanced and 900 shares declined. A total of 108 shares were unchanged.
Auto stocks rose after the Reserve Bank of India's (RBI) surprise announcement of a cut in its main lending rate viz. the repo rate by 25 basis points in an unscheduled review today, 15 January 2015. Mahindra & Mahindra (M&M) (up 3.19%), Hero MotoCorp (up 1.17%), Escorts (up 1.37%), Ashok Leyland Tata Motors (up 0.96%), Ashok Leyland (up 1.87%), Eicher Motors (up 0.52%), Maruti Suzuki India (up 1.83%), Bajaj Auto (up 0.51%) and TVS Motor Company (up 0.02%), edged higher. Lower interest rates may help revive demand for vehicles. Purchases of automobiles, including that of cars, utility vehicles and commercial vehicles are substantially driven by financing.
Capital goods stocks also rose. Punj Lloyd (up 3.46%), ABB (India) (up 1.72%), L&T (up 2.92%), Alstom India (up 1.67%), Havells India (up 1.27%), and Siemens (up 2.59%) gained.
Crompton Greaves gained 1.33%. The company after market hours yesterday, 14 January 2015, in a clarification with regard to news item titled "Temasek eyes fan biz of Crompton Greaves", said that it has no information regarding the rumoured news mentioned in the news item.
Bharat Heavy Electricals (Bhel) rose 2.18% after the company said during market hours that it has bagged a contract worth Rs 1202 crore from Karnataka Power Corporation for setting up a combined cycle power plant in Karnataka on engineering, procurement and construction basis, involving supply and commissioning of a fuel-efficient state-of-the-art advanced-class gas turbine (GT). Karnataka Power Corporation is owned by the Karnataka state government. Significantly, with this order, Bhel has contracted 242 GTs including 22 advanced-class GTs. Bhel said that another 3,100 megawatts of projects are presently under construction by the company at Bellary, Yeramarus and Edlapur in Karnataka.
In the foreign exchange market, the rupee strengthened past 62 against the dollar after the Reserve Bank of India's (RBI) surprise announcement of a cut in its main lending rate viz. the repo rate by 25 basis points in an unscheduled review today, 15 January 2015. The partially convertible rupee was hovering at 61.775, compared with its close of 62.19 during the previous trading session.
Brent crude futures edged lower after staging a rebound during the previous trading session. Brent for February settlement, which expires today, 15 January 2015, was off 19 cents at $48.50 a barrel. The contract had jumped $2.10 a barrel or 4.5% to settle at $48.69 a barrel during the previous trading session. Brent for March settlement was off 58 cents at $49.26 a barrel.
The RBI said inflationary pressures as measured by changes in the consumer price index have been easing since July 2014. To some extent, lower than expected inflation has been enabled by the sharper than expected decline in prices of vegetables and fruits since September, ebbing price pressures in respect of cereals and the large fall in international commodity prices, particularly crude oil. Crude prices, barring geo-political shocks, are expected to remain low over the year, RBI Governor Dr. Raghuram G Rajan said in a statement while announcing a surprise cut in repo rate today, 15 January 2015. Weak demand conditions have also moderated inflation excluding food and fuel, especially in the reading for December, Rajan said. Rajan further said that the government has reiterated its commitment to adhering to its fiscal deficit target. These factors have significantly reduced the momentum of inflation, compensating for the widely anticipated ending of favourable base effects, Rajan said. Households' inflation expectations have adapted and both near-term and longer-term inflation expectations have eased to single digits for the first time since September 2009. These developments have provided headroom for a shift in the monetary policy stance, Rajan said.
Inflation outcomes have fallen significantly below the 8% targeted by January 2015, the RBI said. On current policy settings, inflation is likely to be below 6% by January 2016, Rajan said. The RBI Governor said that further easing of monetary policy will be dependent on data that confirms continuing disinflationary pressures. Also critical would be sustained high quality fiscal consolidation as well as steps to overcome supply constraints and assure availability of key inputs such as power, land, minerals and infrastructure. The latter would be needed to ensure that potential output rises above the projected pick-up in growth in coming quarters so as to contain inflation, Rajan said.
The RBI's next monetary policy review is scheduled on 3 February 2015.
Asian stocks rose today, 15 January 2015, after India cut interest rates. Key benchmark indices in China, Indonesia, Singapore, Hong Kong, South Korea, Taiwan and Japan were up 0.03% to 2.63%. Taiwan's Taiwan Weighted was off 0.16%.
In Japan, Bank of Japan Governor Haruhiko Kuroda reportedly said that a falloff in demand after an increase in the sales tax in April was diminishing, an indication that the economy may be getting over the sluggishness that pushed it into recession.
In China, the latest data showed that Chinese banks issued 697.3 billion yuan ($112.5 billion) worth of new loans in December, down from 852.7 billion yuan in November. Total social financing, a broader measurement of credit in the economy, rose to 1.69 trillion yuan in December from 1.15 trillion yuan in November. China's foreign exchange reserves stood at $3.84 trillion at the end of December, down from $3.89 trillion at the end of September.
Trading in US index futures indicated that the Dow could gain 131 points at the opening bell today, 15 January 2015. US stocks fell yesterday, 14 Janaury 2015, as a deepening commodities rout and an unexpected drop in American retail sales fueled concern over growth..
US retail sales dropped 0.9% in December, the biggest slide since January 2014, following a 0.4% gain in November that was smaller than previously estimated, according to the Commerce Department.
In Europe, European Central Bank (ECB) President Mario Draghi said in an interview with Germany's Die Zeit newspaper published yesterday, 14 January 2015, that the bank didn't have many options left to expand its monetary policy, an indication that officials are moving toward the launch of purchases of government bonds issued by eurozone countries.
The European Court of Justice yesterday, 14 January 2015, issued an interim decision that allows the European Central Bank to go ahead with a bond-buying program known as Outright Monetary Transactions (OMT) with certain conditions.
Meanwhile uncertainties over the status of Greece including its possible exit from the eurozone are likely to persist until the early election in the country later this month. Greece is set to hold snap elections on 25 January 2015 after it failed to elect a new president in a third round of voting late last year. The Greek leftist opposition party Syriza leads opinion polls ahead of national elections on 25 January 2015. Syriza has demanded debt relief from the eurozone and promised to roll back the austerity and reform measures that the country has undertaken in exchange for the international bailout that the government negotiated in 2012.
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