Sensex hovers on a flat line ahead of RBI policy; broader markets outpace : 8 Feb 2017

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The benchmark indices on Wednesday were trading flat ahead of Reserve Bank of India (RBI)’s monetary policy meeting due later in the day. Globally, Asian markets dipping below their four-month highs also sapped investor confidence.

At 10:10 am, the S&P BSE Sensex was trading at 28,329, down 6 points, while the broader Nifty50 was ruling at 8,770, up 2 points.

In the broader market, the BSE Midcap and BSE Smallcap indices outperformed the frontline indices to quote 0.5% and 0.4%, respectively.

“Nifty has to sustain above 8,740 zones to witness buying interest towards 8,820 and then 8,880 zones, while on the downside, support is seen at 8,740 and 8,680 and then 8,650 zones,” said brokerage Anand Rathi in a research note.

Sectors and stocks

BSE Consumer Durables (up 3%) was the leading sectoral gainer thaks to over 9% surge to Rs 431 in Titan after the company reported a robust December quarter earnings despite lower demand on account of demonetisation.

Tata Steel was the top gainer on Sensex after the company reported a consolidated net profit of Rs 232 crore in Q3 against loss of Rs 2,748 crore in the same period last year.

Banking stocks such as Axis Bank, PNB and ICICI Bank were trading lower ahead of the RBI policy. BSE Bankex index was down 0.3%.

RBI policy

Global brokerage Bank of America Merill Lynch expects RBI to cut lending rates today as well as in the April policy review in order to reverse the impact of the demonetisation drive to growth prospects.

“We expect the RBI to cut rates by 25bps on Wednesday on demonetisation shock, benign Consumer Price Inflation (CPI), fiscal deficit cut in Budget 2017 and rupee stability,” said the brokerage in a report released yesterday.

However, even if the RBI goes for a lending rate cut today, banks are unlikely to go a further rate reduction given they have already effected a sharp cut in marginal cost-based lending rates (MCLR) in January, say experts.

Global markets

Asian markets ipped from four-month highs on worries over the political and economic uncertainty in the United States and Europe.

MSCI’s broadest index of Asia-Pacific shares outside Japan ticked down 0.2%. South Korean shares fell 0.6%, while Japan’s Nikkei pared its early gains to dip 0.2%. China’s Shanghai Composite and Hong Kong’s Hang Seng indices were also down 0.4% and 0.1%, respectively.

Overnight, Wall Street edged marginally higher. The Dow Jones Industrial Average rose 37.87 points, or 0.19%, to 20,090.29, the S&P 500 gained 0.52 points, or 0.02%, to 2,293.08 and the Nasdaq Composite added 10.67 points, or 0.19%, to 5,674.22.

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