Indian Indices Close on a Dull Note; IT Stocks Lead Losses

Wed, 7 Feb Closing

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After opening the day in green, share markets in India witnessed negative trading activity throughout the day and ended the day on a weak note. Losses were seen across most sectors with stocks in the capital goods sector and stocks in the IT sector, leading the losses.

At the closing bell, the BSE Sensex stood lower by 113 points (down 0.3%) and the NSE Nifty closed down by 22 points (down 0.2%). The BSE Mid Cap index ended the day up by 0.4%, while the BSE Small Cap index ended the day up by 1.9%.

Asian stock markets finished in red. As of the most recent closing prices, the Hang Seng was down by 0.9% and the Shanghai Composite was down by 1.8%. The Nikkei 225 was flat. Meanwhile, European markets were trading on a positive note. The FTSE 100 was up by 0.6%, The DAX, was up by 0.5% while the CAC 40 was up by 0.4%.

The rupee was trading at Rs 64.29 against the US$ in the afternoon session. Oil prices were trading at US$ 66.74 at the time of writing.

In news about the economy. The Reserve Bank of India (RBI) kept interest rates unchanged in its monetary policy review today.

The six-member Monetary Policy Committee (MPC) of the RBI kept the repo rate unchanged at 6% in its sixth bi-monthly policy review of the fiscal year.

As per the RBI statement, five of the six MPC members voted in favor of a status quo.

With this, the policy rate stands at a seven-year low. The MPC committee had last cut the repo rate by 25 basis points in August last year.

As for inflation, the RBI raised its March-end Consumer Price Index (CPI) inflation forecast to 5.1% and projected an inflation range of 5.1-5.6% in the first half of the next fiscal year.

India's Policy Rates Compared to Asian Economies

The Reserve Bank of India's (RBI) monetary policy statement is one of the most tracked events in the financial world. With both core and retail inflation easing to new lows, a rate cut in key interest rates was widely expected. The RBI did not disappoint and announced a quarter of a percentage point cut.

The decision is in line with the RBI's neutral monetary policy stance, tracking the rate of inflation.

The chart below shows how India's inflation and policy rates stand in comparison with other Asian economies.

However, the central bank in its monetary policy statement expects inflation to rebound soon.

The decision comes at a time when inflation as measured by the CPI has been accelerating and has topped 4%, which is the central bank's medium-term target, for two consecutive months. Latest data shows CPI inflation accelerated to 5.2% in December, the fastest pace in 17 months, from 4.8%. The rise was due to the statistical impact of a low base.

On growth, the RBI has cut the growth projections for the current fiscal to 6.6% from 6.7% earlier. For the next financial year, it has projected gross value added (GVA) growth of 7.2%.

Rate cut or not, we do not attempt to predict how and when macroeconomic developments will unfold. Instead, we focus on the fundamentals and the underlying business strength of companies. The ValuePro team is always on the lookout for all-weather stocks whose fortunes are not tied to economic cycles.

Moving on to news from stocks in the automobiles sector. Tata Motors share price ended the day on an encouraging note today. The surge came in after the company's management outlined dealership expansion plans.

Tata Motors said that they plan to double their dealership network to 1,500 by 2020.

The company currently has over 770 dealers and covers 70% of the market size. It plans to almost double that number to 1,500 and cover over 90% of the market by 2020.

He added that they would also look at existing Tata Motors truck dealers to expand their presence. However, there are no plans to open showrooms under different brand like Maruti. Apart from expanding showrooms, the company is also working on Virtual showrooms and as part of a pilot three such virtual stores will be opened in Delhi, Mumbai and Bengaluru.

Meanwhile, the company said that sales of its subsidiary Jaguar Land Rover rose 3% to 49,066 units in January 2018 over January 2017.

Tata Motors said that sales of its subsidiary Jaguar Land Rover (JLR) rose 3% to 49,066 units in January 2018 over January 2017. Jaguar sales were up by 1% year-on-year with 14,066 units sold amid strong demand for the Jaguar XF Sedan, including the long-wheelbase XFL in China.

Tata Motors share price ended the day higher by 0.8%.

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