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Sensex Extends Gains; GAIL Surges 6.6%
Fri, 29 Sep 01:30 pm | Rini Mehta, TM Team

After opening the day on a firm note, the share markets in India continued to witness buying interest in afternoon session. All sectoral indices are trading in green, with stocks in the realty sector & energy sector leading the pack of gainers.

The BSE Sensex is trading higher by 180 points (up 0.6%) while the NSE Nifty is trading higher by 62 points (up 0.6%). The BSE Mid Cap index is trading up by 1.3% while BSE Small Cap index is trading up by 1.4%. Gold prices, per 10 grams, are trading at Rs 29,595 levels. Silver price, per kilogram is trading at Rs 39,760 levels. Crude oil is trading at Rs 3,368 per barrel. The rupee is trading at 65.76 to the US$.

All oil & gas stocks are trading in green with only Hindustan Oil Exploration witnessing selling pressure. GAIL India share price rallied 8% intraday after the Petroleum and Natural Gas Regulatory Board (PNGRB) put up a consultation document on unified pipeline tariff proposing a 60% hike in tariff by the company.

Notably, the aforementioned proposal has already been approved by the Cabinet Committee on Economic Affairs (CCEA) and petroleum ministry has to decide based on PNGRB recommendations.

Earlier, GAIL had proposed to the central government to move to a unified tariff system for sale of natural gas. This move will help reduce the landing price of piped cooking gas and will also boost demand for the same, the reports noted.

Reportedly, the unified tariff may do away with levy of multiple tariffs for use of multiple natural gas pipelines and therefore, shall promotes equitable distribution of gas and facilities, uniform gas based economic development across the country, increased share of natural gas in energy mix etc.

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However, in case of unified tariff, tariff for some existing natural gas pipeline customers may increase.

Moving on to the news from banking sector. Ahead of the monetary policy rate decision, State Bank of India has cut base rate by 5 basis points (bps) to 8.95%.

This comes after a couple of other public sector banks including Bank of Baroda and Andhra Bank earlier announced a reduction in their base rates.

Bank of Baroda revised its base rate downwards by 35 bps to 9.15% with effect from 1 October. While, Andhra Bank reduced the rates to 9.55%, down by 15 bps from 9.7%.

However, SBI did not revise the marginal cost based lending rate (MCLR), impacting the lending rates on new loans since April 2016.

SBI's one-year MCLR continues to be at 8%, while for three and six-month loans it stands at 7.9% and 7.95%, respectively. The three-year MCLR is at 8.15%.

The reduction in the base rate will benefit home loan borrowers before April 2016 who have not switched over to the MCLR. The cut in the base rate comes close on the heels of a reduction in interest rate on SBI's savings account to 3.5% from 4%.

One shall note that, RBI will announce its decision on key policy interest rates on 4 October after a two-day meeting by the monetary policy committee on Tuesday and Wednesday.

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

India's Policy Rates Compared to Asian Economies

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

The RBI's monetary statement in June had projected quarterly average inflation in the range of 2-3.5% in the first half of fiscal 2018, and 3.5-4.5% in the second half. Now it expects inflation to be about 4% by the year end. As long as inflation follows this track, the possibilities of rate cuts during this fiscal year remain slim.

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.

State Bank of India share price is trading up by 0.7%.

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