Markets get a CRR boost!

Tue, 24 Jan Closing

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Although they could not build up on the gains achieved during the earlier part of the day, indices in the Indian stock markets did enough to hold on to the same and as a consequence, close the day strongly in the positive. Thus, while BSE-Sensex edged higher by around 240 points, gains on the NSE-Nifty stood at around 80 points. BSE Mid cap and BSE Small cap indices also performed well, gaining in the region of 1% each. More than three stocks gained for every one that closed the day in the negative on the Sensex.

Most Asian indices also closed strong today but sentiments seem to be weak in Europe as most indices there are currently trading in the red. The rupee was trading at Rs 50.0 to the dollar at the time of writing.

Markets which had started 2012 on such a strong note received a further boost on the back of a cut in CRR by India's central bank. The Reserve Bank of India (RBI) decided to cut the cash reserve ratio (CRR) by 0.5% bringing it to 5.5%. This move is expected to ease liquidity by injecting Rs 320 bn in the banking system. However, the repo rate (rate at which banks borrow from the Reserve Bank of India (RBI)) was kept unchanged at 8.5%. Thus, while the markets cheered the move, it remains to be seen how long will the optimism last as the RBI Governor sought to mince no words with respect to the precarious fiscal position.

Colgate, the oral care major has put up a very good show for the quarter ended Dec 2011. Aided by a sharp jump in operating margins, the company's bottomline grew a robust 75% YoY on the back of a much lower but a nevertheless decent growth of 20% YoY. The company's operating profitability increased significantly in 3QFY12 on the back of an 11% cut in advertisement & promotional expenses. Thus, the same fell to 16% of sales during the quarter from a high of 21% in the corresponding previous quarter. On the other hand, the 20% growth in topline was driven by 15% YoY growth in off take of toothpaste. The company is setting up a toothpaste manufacturing plant at Sanand, in Gujarat. The stock closed marginally lower today.

NTPC, India's largest power generation company, is planning to enter into a joint venture agreement in Bangladesh for a 1,320 MW power project. The project is likely to have a 50:50 shareholding structure between the Indian firm and the Government of Bangladesh. Run on imported coal, the construction of the project is likely to start by April next year. This project is a part of the memorandum of understanding between Bangladesh Power Development Board and NTPC and signed late last year in order to establish two thermal power projects in Bangladesh. The total investment for the plant is likely to be in the region of Rs 132 bn. NTPC closed marginally lower today.