Rate hike overhang continues

Wed, 4 May Closing

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   Pre-Open   

   09:30 am   

   11:30 am   

   01:30 pm   

Indices continued on their downward trend with the Indian stock market closing in the red once again after the RBI's 0.5% rate hike yesterday. The BSE-Sensex lost in the region of 65 points whereas NSE-Nifty closed lower by around 28 points (down 0.4%). The smaller indices also faced selling pressure with the BSE Midcap and BSE Small cap indices both losing 0.5% each. Auto and IT stocks led the declines while oil & gas and PSU stocks saw some buying interest.

Most major Asian indices also closed the day in the red with China, Hong Kong and Singapore leading the declines. Europe is currently trading weak. The rupee was seen trading at Rs 44.52 to the dollar at the time of writing.

Most indices were trading lower today, with the exception of the BSE Oil and Gas index. According to a leading business daily, the government is planning to consider a hike in fuel prices. An empowered group of ministers headed by the finance minister Mr Pranab Mukherjee are scheduled to meet on May 11, 2011 to discuss the same. The government plans on hiking diesel prices by up to Rs 3/litre. This will be post the state assembly elections in five states which finish next week. An increase in petrol rates is also on the cards which can be to the extent of Rs 3-4/litre. An increase in domestic LPG prices may also be discussed.

Crude oil prices have soared to over US$ 110 per barrel in the international market. The extent to which a hike is needed to take petrol prices to international parity levels is about Rs 8.5/litre. The entire burden however will not be passed on to consumers in one shot, but it will be raised gradually. A hike in petrol prices will help stop state-run oil marketing companies (OMCs) like ONGC, BPCL, HPCL etc from bleeding. OMCs have projected an over Rs 1.8 trillion revenue loss in FY12 (financial year 2011-2012) on account of selling diesel, domestic LPG and kerosene at below market rates.

Leading mortgage financier HDFC and private sector bank IndusInd have recently signed a partnership agreement. As per the tie-up, HDFC will have access to IndusInd's nation-wide network of 300 branches to sell its home loans. The processing, disbursement and servicing functions will remain with HDFC. This move will help open up new markets and customers for both financiers. It will help improve IndusInd's focus on retail customers and augment its product mix while giving HDFC access to a broader distribution network. With the RBI's rate hike overhang still playing on the markets, both stocks closed lower for the day.