Morning Note - Market Insight By Mansukh - 27th July, 2011

On Tuesday 26 July 2011,Surprising move by Reserve Bank of India (RBI) in its first quarter review of Monetary Policy 2011-12 led to the massacre at Dalal Street. RBI showing an unexpected resolution in fighting  persistently  high inflation  despite  slowing  growth  in Asia's third-largest  economy,  much against the street expectation hiked the key policy rates by 50 bps, taking the repo and reverse repo rate to 8% and 7% respectively. The central bank of India's anti inflation stance coupled with its hawkish language  mainly shunned  the investors  from the Indian equity markets  as this indicated  that the world's  one of the most aggressive  inflation  fighters  had much in its offing given the clambering inflation, putting an end to the expectation that the current rate hike would mean the end of rate hike cycle. What also graved investor's  sentiment  was that the central bank increased  its projection  for wholesale inflation at the end of the fiscal year in March to 7 percent, from 6 percent earlier.  In tandem with the global markets, Indian equity markets also witnessed a sluggish day of trade as on the global front, US stocks dipped on Monday as lawmakers remained in a standoff over raising the debt ceiling to avoid default. However, Asian shares ended on strong note despite the US Debt deadlock as upbeat earnings lured buyers. The European shares edged lower on Tuesday weighed down by weaker than expected results from oil major BP and Swiss Bank UBS and investor concern over the consensus of a US debt limit deal.

The BSE Sensex lost 369.53 points or 1.96% and settled at 18,501.76. The index touched a high and a low of 18,944.60 and 18,481.63 respectively. 1 stock advanced against 29 declining ones on the index (Provisional). The BSE Mid-cap index slipped 0.97% while Small-cap index was down 0.78%. On the BSE Sectoral front, there were no gainers. On the flip side, Realty down 3.74%, Capital Goods down 3.44%, Bankex down 2.60%, Auto down 2.29% and Power down 1.86% were the only losers.

India VIX, a gauge for market's short term expectation of volatility gain 0.52% at 19.30 from its previous close of 19.20 on Monday. The S&P CNX Nifty lost 107.90 points or 1.90% to settle at 5,572.40. The index touched high and low of 5,702.25 and 5,560.15 respectively. 3 stocks advanced against 47 declining ones on the index. (Provisional)


All the Asian equity indices finished the day's trade in the positive terrain on Tuesday as investors hopeful that a compromise would resolve the US debt deadlock even as President Barack Obama illustrated his country as being dangerously close to default. Japanese Nikkei surged about half a percent in the trade as robust quarterly earnings from companies such as Canon and Kao Corp and optimism over upcoming earnings reports of other Japanese firms overshadowed concerns over stalled negotiations on the US debt ceiling moreover, Chinese Shanghai Composite index rose over half a percent on bargain hunting in large-cap stocks after tumbling almost three percent to a one- month low in the previous session in the aftermath of last week's deadly collision of a high-speed