RBI Hike CRR by 0.5%

123jump.com Staff
21 Apr, 2008
New York City

Stocks in India rallied in sympathy with regional gains. Sensex in Mumbai trading rose 1.6% to 16,739. The Reserve Bank of India ahead of its annual fiscal policy review announced 0.5% increase in cash reserve ratio in an effort to cool the inflation. Wholesale and consumer price inflation indexes have been rising rapidly and are now running near twice the target rate set by the government. Titagarh wagon, new issue, was the most active on BSE trading.

[R]10:00AM New York, 7:30PM Mumbai - Sensex rise for a fifth consecutive trading session and banks rose despite a rise in cash reserve ratio in two stages.[/R]

Market Sentiment

Indian shares rallied on Monday, extending gains recorded during the previous four trading sessions last week.

The stocks also braved a steep 50 basis points rise in cash reserve ratio announced by the Reserve Bank of India late on Thursday last week.

In Mumbai trading, the 30-share BSE Sensex rose 1.6% or 258.13 at 16,739.33 with 20 stocks in the index recording gains while 10 stocks declined.

Of the BSE traded shares, 2,038 shares advanced, 677 shares declined while 56 shares remained unchanged.

On the National Stock Exchange Nifty advanced 1.6% or 78.60. At close the 50-share index stood at 5053.40 levels.

Metal shares staged a strong comeback, reversing earlier losses while banking shares recorded gains despite the increase in cash reserve for banks. Technology shares, which rallied last week, fell on selling pressure.

Oil rally continues

Crude oil prices surged above $117, setting a new record high on Monday because of worries of supply disruptions from major producers and comments by OPEC reiterating there is no need to raise output.

Turnover

Daily turnover on the BSE stood at 5,496 crore rupees and 13,226 crore rupees on the National Stock Exchange.

Debutant Titagarh Wagons was the most active stock on the BSE with a turnover of 366.69 rupees followed by Orchid Chemicals, Reliance Industries, Essar Oil and Reliance Capital.

Gainers and Decliners

Of the BSE shares, Tata Steel with a rise of 8.7% to 777.55 rupees led the advancers in the Sensex index. Infosys Technologies declined 1.3% to 1,645 rupees and led the decliners in the index.

Hindalco Industries gained 3% to 191.85 rupees, National Aluminium rose 3.1% to rupees and Steel Authority of India surged 4.3% to 178.40 rupees.

TCS lost 1% to 991.05 rupees.

ICICI Bank rose 4.2% to rupees, State Bank of India increased 3.7% to 1,745.30 rupees and HDFC Bank rose 3.6% to 1,447 rupees.

Banks face higher cash reserve ratio

The unscheduled CRR rate hike comes ahead of RBI''s annual credit policy for fiscal 2009 to be released on next week.

According to the central bank, CRR hike will be introduced in two stages. In the first stage, RBI will raise reserve by 25 basis points to 7.75% on April 26 2008 and in the second stage another 25 basis point rise will come into effect from May 10 2008.

According to economists, the increase in CRR will shrink the available funds from banks by about 18,500 crore rupees.

Larsen & Toubro gained 2.5% or 2,845 rupees on news reports that the company plans to develop a commercial complex at Seawoods railway station, Navi Mumbai over 40 acres of land for 3,500 crore rupees.

Bharti Airtel rose 3.3% to 850 rupees and Jaiprakash Associates gained 7.3% to 233.15 rupees.

Mahindra & Mahindra fell 0.9% to 633 rupees and Bharat Heavy Electricals declined 0.2% to 1,782 rupees.

Reliance Update

Reliance Industries edged higher by 0.04% to 2,638 rupees on news reports that the company has formed a joint venture with Marks & Spencer Group, the UK''s largest clothing retailer, to open at least 50 stores in India over the next five years.

Reliance Communications gained 5.7% to 560.55 rupees.

Earnings News

Software exporter Wipro was down 1.2% to 453.50 rupees. The company on Friday reported 3% growth in net earnings to 880 crore rupees on 7.5% in the fourth quarter ended March 2008 over the third quarter ended December 2007.

The company forecasted revenue from combined IT services to be $1,060 million in the current quarter

Satyam Computer Services shares fell 2.5% at 457.10 rupees. The company reported 17.84% increase in net earnings to 468.45 crore rupees on growth in total income of 31.45% to 2337.84 crore rupees during the third quarter in 2008 over the fourth quarter ended March 2007

New Issues

Titagarh Wagons settled at 707.20 rupees, a premium of 30.96% over its issue price of 540 rupees. It listed at 550 rupees on BSE, a 1.9% premium over its issue price.