The Indian markets saw a renewed buying interest after the country’s central bank, the RBI hiked key rates in an attempt to tame inflation. Currently, stocks forming part of the auto, realty and IT spaces are leading the pack of gainers with the BSE-Auto, BSE-Realty and the BSE-IT indices trading higher by 1.6%, 1.2% and 1% respectively. The market sentiments are positive as the advance to decline ratio is poised at 1.2 to 1 on the overall BSE.
The BSE-Sensex is trading up by around 85 points (up 0.5%), while the NSE-Nifty is up by about 20 points (up 0.4%). Buying interest is also witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.5% and 0.3% respectively. The rupee is trading at 46.74 to the US dollar.
The RBI has revised the repo rate upwards by 0.25%. On the other hand the reverse repo rate (rate at which banks lend to RBI) has been hiked by 0.5%. What this means is that the RBI wishes to persuade banks to borrow less from it and instead keep more money with the RBI. The obvious impact of this will be in the form of liquidity being sucked out from the banking system. Not that this will impact money supply and credit growth. The RBI has retained its earlier prediction of credit growth of 20% for FY11. The growth so far (1QFY11- at 22%) has marginally exceeded its estimate.
Hotels stocks are trading mixed with Oriental Hotels and Hotel Leelaventure trading firm and Taj GVK and Indian Hotels trading weak. Taj GVK released its 1QFY11 results. The company has performed well on the back of higher occupancy as the effects of the economic slowdown fade away. The company’s top line grew by 28% YoY reflecting higher demand. Operating margins of the company expanded by 4.8% on the back of lower staff costs, power and fuel costs and other expenditure as a percentage of sales. Net profit of the company more than doubled during the quarter as a result of increase in operating income.