Markets cool off after CRR cut

Mon, 17 Sep Closing

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The Indian stock markets started the day on a positive note on strong domestic cues. The government earlier announced FDI in retail as well as aviation giving a strong boost to stocks from these sectors. Indices sustained till the Reserve Bank of India monetary policy was announced. In a cautious stance against inflation, the central bank continued to hold rates steady. In order to boost liquidity however it cut the cash reserve ratio (CRR) for banks by 0.25% to 4.5%.

Finally indices moved upwards towards the final hour of trade and the indices ended the day well in the green. The market breadth was positive with 1.3 advances to every decline. The BSE-Sensex closed in the positive, higher by around 78 points (up 0.4%). The NSE-Nifty also closed higher by around 54 points (up 1%). The smaller indices had a better day on the bourses. The BSE Mid Cap index and the BSE Small Cap each closed 1.1% higher in trade today. Capital goods and realty stocks saw a bulk of the gains today with monetary easing expectations. Banking stocks also saw significant gains with HDFC Bank, HDFC and ICICI Bank hitting new highs. FMCG indices and software stocks however closed lower.

As regards global markets, Asian indices had a mixed outing today. European indices opened the day on a negative note. The rupee was trading at Rs 53.89 to the dollar at the time of writing.

Bond yields globally have been softening. Plus QE3, Cash Reserve Ratio cut, diesel price hike and the attempt to reduce subsidies will also help reduce domestic yields. Taking benefit of this situation, IDBI Bank plans to raise about US$ 500 m under Medium Term Notes (MTN) programme. The bank is looking at issuing US dollar denominated bonds and will be issued by the Dubai International Financial Centre (DIFC), the Dubai Branch of the bank this week. The tenure of bonds will depend on investor appetite. Rating agency Moody's has assigned a Baa3 rating to the proposed issuance of long-term senior unsecured notes under its US$ 1.5 bn MTN programme. In August, IDBI had raised SGD 250 million through Singapore dollar denominated bonds having 3 year maturity under MTN. These carry a fixed coupon of 3.65% per annum. IDBI has raised about US$ 920 m under MTN so far. The bank will renew MTN program in January 2013 and may scale it up to US$ 3 bn.

BGR Energy Systems Ltd recently bagged a Rs 19 bn contract from Damodar Valley Corporation to supply steam generators. These will be supplied for the 2x660 MW Raghunathpur Thermal Power Project Phase-II. The order is executable over 58 months and provides for price variation and foreign exchange changes. The company's order book currently stands at Rs 146 bn. BGR Energy holds a 70% stake in BGR Boilers Pvt Ltd promoted jointly with Hitachi Power Europe, Germany, which holds a 30% stake. It has a technical collaboration with its partner to make 660 MW, 700 MW, 800 MW and 1,000 MW super critical boilers.