Although trading in the green, the Indian equity markets shed a portion of their morning gains during the post noon trading session. Currently stocks from the realty, capital goods and banking sectors are leading the pack of gainers, while those from the FMCG and IT are the top underperformers.
The Sensex today is trading higher by about 83 points (up 0.5%), while the NSE-Nifty is trading higher by about 32 points (0.6%). Midcap and smallcap stocks are trading firm with the BSE Mid Cap and BSE Small Cap indices trading higher by 0.8% each. The rupee is trading at 54.05 to the US dollar.
The Reserve Bank of India (RBI), in its mid-quarterly monetary review, cut the cash reserve ratio (CRR) by 0.25%, while leaving the key interests rates unchanged. CRR is the proportion of cash that the banks park with the regulator. This move would provide banks with some liquidity. The repo rate would remain at levels of 8%, while the CRR will be at 4.5%. This 0.25% reduction in CRR would inject about Rs 170 bn of liquidity into the banking system. The RBI seems to have taken a cautious view by not cutting the interest rates on concerns over the inflations levels rising. The wholesale price-based inflation for August moved up to 7.55% from 6.87% in the previous month.
Stocks from the BSE-Metal index are trading firm with Jindal Steel, Sterlite Industries and Steel Authority of India (SAIL) leading the pack of gainers. A leading business daily has reported that steel imports during the current fiscal (April to August 2012) grew by almost 39% YoY to 3.32 m tonnes. Production during this period grew by 4.3% to 31.7 mt. Consumption has increased to 31.02 mt, up by 6.9%. This comes at a time when the domestic demand of steel is weak, given that his is the traditionally lean period on the back of the monsoon season. Steel exports during the period have declined by 4% YoY to 1.85 mt. It is believed that Japanese and Korean firms have been flooding the Indian markets with their excessive outputs given that there is a low duty structure under the Free Trade Agreement (FTA). It is believed that the import duty on Korean and Japanese steel products has been reduced to 3.13% from 5% in 2010, while those from other regions attract a duty of 7.5% duty.