Cheer to Domestic Markets on global cues…
Date: 30/01/2009 --- Amar Ranu1
The much awaited RBI’s credit policy failed to bring any cheers to financial industries, however,
the markets traded in range bound initially and finally ended in a good positive note. The equity
bellwethers Sensex and Nifty gained by 8.6% and 7.4% and jumped to 9,424 and 2,875 level
respectively. The RBI maintained status quo and did not bring any changes in key rates as
hoped by Indian Inc, thus, giving a strong signal to banks to bring down the PLR rates. This led
to swift action from UCO bank and PNB which agreed to bring down the PLR post Feb 01. The
Real GDP growth for 2008-09 is revised downwards to 7.0%, with a downward bias from
7.5-8.0% earlier, but much higher than the average World GDP which is slated to grow in the
range of -1 to 2%.
Despite the entire negative domestic cues such as RBI inaction on interest rates, high inflation
numbers, poor 3rd quarter earnings et al, the markets ended in positive territory probably due
to firm trends across global market. The Barrack Obama’s administration massive package plan
of $825 billion which got approved by the Congress brought confidence in the global markets.
The major beneficiary of auto bailout package announced by UK would be Tata-Jaguar-Rover
combine. This would definitely bring cheers to struggling Tata Motors which posted a loss of Rs
263 crore in the 3rd quarter of current fiscal as compared to a profit of Rs 499.05 crore in the
corresponding quarter of last fiscal.
In the week, the first two day rally was mainly led by short covering as confirmed from F&O
data. All round buying in scrips across sectors led to the indices close in positive. But on
Thursday, the bull took a breather and plummeted marginally mainly due to weak European
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cues and high inflation reporting. The RBI report which has targeted a range of 3% for inflation
in the coming months did not rule out with deflation like situation.
Despite the lower than expected quarterly earnings from SAIL and Tata Steel, the BSE Metal
Index ended as the top gainer adding 15.2% in its category. The other major movers were
Realty, Oil, Bank, IT indexes gaining in the range of 8-10.2%.
On the debt front, the 10-year bond posted the biggest monthly loss in the last decade after a
speculation that government borrowing would increase to finance its additional spending. The
federal fiscal deficit widened to 2.18 trillion rupees in the first nine months of 2008-09 fiscal
year or 163.8 % of the full year target. The data clearly impacted the 10-year bond which rose
briefly to 6.21 % from 6.18%. The 3G auction inflows in the range of 300-400 billion rupees
might ease the pressure on government spending after the finance ministry suggesting a
doubling in the sale base price and the issue now is pending with a panel of ministers. The 10-
year 8.24% paper would be replaced by 6.05% 2019 paper and would become the new
benchmark. The 10 year security is widely used by traders to take a view on interest rates.