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Market Report

Friday, 20-Sept-2013

NSE

  • The Sensex fell as much as 595.21 points before ending 382.93 points lower, or -1.85 per cent, to close at 20,263.71 today. It was the biggest drop since a 651-point decline on September 3. The Nifty index on the National Stock Exchange plunged 103.45 points, or -1.69 per cent, to close at 6,012.10 today, after the RBI unexpectedly hiked the repo rate to check inflation.

  • The Sensex had yesterday surged 684 points to an almost three-year high after the US Federal Reserve surprisingly left its stimulus programme unchanged, recoding its biggest single day gains since May 2009 in absolute terms. Biggest point to note was the repeat of the huge volumes of yesterday and no let-up in FII investment inspite of the sudden steep fall in our maket today. No strength has actually been lost.

  • RBI Governor Raghuram Rajan, in his maiden policy review, unexpectedly hiked the repo rate or the short term lending rate by 25 basis points to 7.5 per cent with immediate effect in a bid to control inflation. The forex market also reacted negatively and the rupee depreciated 85 paise to 62.62 to the dollar intra-day. Interest-sensitive sectors such as realty and banking were the major losers as a higher cost of credit would hamper their business and reduce revenue.

  • According to analysts, a weak macro environment will pull Sensex from its highs as fundamentals of the economy still remain weak. WPI inflation which came at 6.1 per cent in August was above the comfort level of RBI came as a shocker for markets. And thus, between the decision to control inflation as well as augment growth pace, repo rate has been hiked by 25 bps to 7.5 per cent, say analysts.

  • Repo rate is the rate at which RBI lends to commercial banks generally against government securities. The increase in the Repo rate will increase the cost of borrowing and lending of the banks which will discourage the public to borrow money and will encourage them to deposit.

  • Fed party over: Nifty seen headed towards 5,500 levels, according to analysts. With important events out of the way, the Nifty is likely to give away most of the gains in the near term. Nifty may continue to see selling pressure in the coming week also. 6000-6150 remains a crucial resistance level. Analysts expect RBI to maintain hawkish stance if inflation is not tamed.

NIFTY 3-Month

(Data/Charts courtesy NSEI/Yahoo!/iCharts/The Economic Times)