Sensex drops 245 points; rupee breaches 60/$ post RBI policy

Equity benchmarks fell 1.3 percent Tuesday as the rupee dropped below the 60-mark post RBI's credit policy review, continuing weakness for the fifth consecutive session.

The BSE Sensex was down 244.94 points to close at 19348.34 while the NSE Nifty slipped 76.60 points to finish below 5800 level at 5755.05, weighed down by selling oil & gas, FMCG, telecom and rate sensitives.

After looking at heavy sell-off in major blue chips and sharp depreciation in rupee, foreign institutional investors (FIIs) may have offloaded some portion of their holding.

Experts feel the failure of the RBI to protect the currency may have spooked the market.

"Some part of the street essentially was looking at a cash reserve ratio (CRR) hike or at least incremental liquidity tightening norms, which is what the RBI has been doing over the last two weeks or so, but since that did not happen maybe there could have been some disappointment," Tirthankar Patnaik, EVP of Institutional Sales at Religare Capital Markets reasoned.

The Reserve Bank of India kept policy rates unchanged today, but the growth projections (GDP) for FY14 revised downwards from 5.7 percent to 5.5 percent.

Perception of an earlier than expected tapering of QE by the US Fed, current account deficit well above the sustainable level of 2.5 percent of GDP for three years in a row and weak investment climate are the major risk factors, says RBI.

Indian rupee reversed all its gains (despite the central bank had taken liquidity measures) seen since July 15 and breached the 60 level again after the Reserve Bank of India said liquidity tightening measures would be rolled back in a calibrated manner as stability is restored to the foreign exchange market, enabling monetary policy to revert to supporting growth with continuing vigil on inflation.

The domestic currency had recovered from a record low of 61.21 to 59 per dollar after the bank had taken liquidity measures since July 15. Today it fell 84 paise to 60.26 against the US dollar.

Nomura Financial Advisory and Securities, in its report, states that Indian rupee is poised to weaken fundamentally as financing the current account deficit remains challenging. ''Since the RBI is leaning against the wind (of INR depreciation) and sounding apologetic about it, there is a growing risk that it will need to enact further measures to tighten liquidity, potentially having to hike the repo rate,'' Nomura adds.

According to Nomura, these measures would not only hurt growth, but could also increase credit risk in the system due to increased corporate defaults and rising banking system risks (due to higher non-performing loans). ''We remain negative on India's economic outlook over the next nine months due to deteriorating external finances, feedback effects from a weak INR (and likely policy responses), a poor growth outlook and the election cycle,'' Nomura adds.

3:55 pm Outperformer: Technology stocks outperformed the market as rupee breached the 60/USD level. The BSE IT index ends the day up almost 1 percent. Wipro was the biggest gainer with a gain of 3 percent on the BSE.

3:45 pm Market closing: The BSE Sensex ends the volatile trading session at 19348.34, down 245 points while the Nifty closes down 77 points at 5755.05 points. About 697 shares have advanced, 1553 shares declined, and 154 shares are unchanged. Most of the indices were under selling pressure today with BSE Bankex, Oil and Gas, Auto, Realty losing heavily.

3:40 pm Losers: Oil marketing companies' (OMCs) stocks were hammered out of shape today. BPCL (down 9 percent), HPCL (down 11.2 percent), IOC (down 8.3 percent), ONGC (down 5.6 percent) were the biggest laggards.

3:30 pm Stake sale: The Cabinet is likely to consider the proposal for sale of 10 per cent of government's stake in Indian Oil Corporation (IOC) on Wednesday, which may fetch over Rs 3,840 crore to the exchequer at the current market price.

"IOC disinvestment proposal is likely to come up for consideration in CCEA (Cabinet Committee on Economic Affairs) meeting tomorrow," sources said, adding that the stake sale would happen through the offer for sale route.

3:20 pm Bankers' Meet: In the Bankers' meet with RBI, here are the following comments made by the bankers in regards to the credit policy review.

PNB :
Gave feedback on asset quality to RBI
Guidance on rollback of RBI measures clear
Requested RBI to ease some loan recast norms
Tightening steps to be rolled back in calibrated manner
Most sectors under stress at this point
Asked RBI to allow 1-time move from available-for-sale to held-to-maturity (HTM)

SBI :
Restructured accounts not NPAs if commercial production date missed
Urged RBI to roll back HTM cut
RBI has agreed to consider LAF facility on Saturday
May not raise rates as loan demand too weak
Not participated in T-bill auctions as SLR holding high

ICICI Bank :
Banks' short-term borrowing cost has gone up

Axis Bank :
Do not see any need to raise rates on immediate basis

The market is very weak with the Nifty still struggling below the 5800-levels. The Nifty is down 77.05 points at 5754.60 while the Sensex is at 19343.95 down 249.33 points. About 626 shares have advanced, 1510 shares declined, and 140 shares are unchanged.

All the indices are punished severely in trade today. However, technology stocks outperform with rupee's fall as it breached the 60/USD level in afternoon.  Rupee is currently at 60.11/USD.

 Dr Reddy's Laboratories disappointed the street on all parameters with the first quarter net profit growing lower-than-expected 7.44 percent year-on-year to Rs 361 crore, sending shares 3 percent lower.

Revenues increased 12 percent to Rs 2,845 crore during April-June quarter from Rs 2,540.6 crore reported in a year ago period.

Analysts on an average had expected the pharma company to report net profit of Rs 421 crore on revenues of Rs 3,127 crore for the quarter.

02:45pm Results Reaction: Dr Reddy's Laboratories disappointed the street on all parameters with the first quarter net profit growing lower-than-expected 7.44 percent year-on-year to Rs 361 crore, sending shares 3 percent lower.

Revenues increased 12 percent to Rs 2,845 crore during April-June quarter from Rs 2,540.6 crore reported in a year ago period.

Analysts on an average had expected the pharma company to report net profit of Rs 421 crore on revenues of Rs 3,127 crore for the quarter.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 6 percent Y-o-Y to Rs 417 crore in first quarter as against analysts' forecast of Rs 641 crore.

02:30pm Index heavyweights Reliance Industries and ITC slipped 2 percent while Sterlite Industries, BHEL and Tata Steel lost 2.5-3 percent.

NTPC shares dropped over 2.5 percent post first quarter earnings. Revenues of the country's largest power producter declined to Rs 15,613 crore in June quarter from Rs 16,166 crore in a year ago period, but net profit increased to Rs 2,527 crore from Rs 2,498.7 crore and operating profit margin improved significantly to 27.3 percent from 23.7 percent Y-o-Y.

02:20 pm The market extended losses in afternoon trade with the equity benchmarks shedding one percent, dragged by oil & gas, metals, FMCG and auto stocks. Private sector lender HDFC Bank fell more than 2 percent, but its rival SBI declined 0.6 percent and ICICI Bank gained 0.4 percent.

The BSE Sensex is down 213.59 points at 19379.69, and the NSE Nifty is down 69.85 points at 5761.80, but the broader markets have fallen more as compared to benchmarks.

The BSE Midcap and Smallcap indices dropped 1.6 percent each. Declining shares outpaced advancing ones by 1457 to 582 on the BSE.

About 582 shares have advanced, 1457 shares declined, and 149 shares are unchanged.

Indian rupee reversed all its gains made since July 15, dropping below 60 again (down 1.18 percent or 70 paise).

ONGC , Hindalco Industries and Bharti Airtel are top losers among Sensex 30 stocks, falling between 4-5 percent.

1:50 pm Rupee: Rupee reverses all gains made since July 15 and has breached the 60 per dollar mark. This seems to be a knee-jerk reaction to RBI's commentary that it will roll back liquidity steps in a calibrated manner, once stability in the forex market is restored.

1:40 pm Brokerage call: Nomura Financial Advisory and Securities on Tuesday downgraded Colgate-Palmolive (India) to "reduce" from "neutral," saying valuations are now expensive and rising competitive intensity is expected to take a toll on the company's profitability.

The maker of Colgate  Max Fresh, Total and Active Salt toothpastes reported a first quarter net profit of Rs 185 crore, up 58 percent year-on-year, helped by an exceptional gain from sale of its Global Shared Services Organisation. Its net sales rose a little lower-than-expected 15 percent to Rs 845 crore.

1:35 pm Houseview: Barclays downgrades GAIL to "underweight" from "overweight", after cutting its earnings per share forecast for fiscal years 2014 to 2016 by 26-31 percent.

Brokerage adds domestic gas output has fallen faster than expected due to a drop in output from the KG-D6 block, and expects a recovery to be 12-18 months away.

1:30 pm Laggard: IOC is under pressure (down 5 percent) after Finance Ministry Sources indicate that Indian Oil issue will happen only after rupee volatility eases.

The market is unable to hold firm and is quickly losing strength with the Nifty sinking below 5800. The Nifty is at 5792.60, down 39.05 points while the Sensex is down 116.74 points at 19476.54. About 643 shares have advanced, 1387 shares declined, and 138 shares are unchanged.

Metals, oil & gas, FMCG and realty stocks are dragging the indices.

On the macro front, it's a no surprise credit policy, the RBI leaves all rates unchanged. But it's a dovish commentary from the central bank. It says it will roll back liquidity steps in a calibrated manner, once stability in the forex market is restored. It also aims to bring down inflation to 5 percent by March 2014 and have lowered their FY14 GDP growth estimate to 5.5 percent from 5.7 percent.

There is a big reaction in the bond market, the 10 year yield cools off significantly around 8.03 percent. The rupee has weakened and has now inched up to 59.80 per dollar.

12:55pm Technology stocks outperformed the market due to rupee depreciation. Country's largest software services exporters TCS , Infosys and Wipro gained 1-1.5 percent.

Indian rupee fell 38 paise to 59.79 against the US dollar in afternoon trade.

Jindal Steel shares rallied more than 2 percent ahead of Q1 earnings. Analysts expect profit after tax of the company to grow by 68.7 percent year-on-year to Rs 650 crore.

Capital goods major Larsen & Toubro rose 1.7 percent while its rival BHEL lost more than 2 percent.

Among banks, private sector lender ICICI Bank advanced 0.7 percent while HDFC Bank and State Bank fell 0.3-0.6 percent.

Globally, European markets are marginally in the green. Asian markets closed 0.5-1.5 percent higher.

12:40pm ONGC , Bharti and Hindalco shares topped the selling list, falling nearly 4 percent.

FMCG stocks continued to reel under selling pressure from last Friday, especially after Hindustan Unilver's first quarter earnings, wherein the company's sales and volume growth were lower than analysts' forecast. ITC and HUL dropped around 2 percent.

Among auto stocks, Bajaj Auto and Tata Motors shares plunged 2-3 percent.

12:20pm The market lost ground in noon trade today with the equity benchmarks falling 0.6 percent after the RBI credit policy, weighed down by FMCG, oil & gas, auto and metals stocks.

The BSE Sensex is down 118.42 points at 19474.86, and the NSE Nifty is down 36.15 points at 5795.50, but the cut is deeper in broader markets.

The BSE Midcap and Smallcap indices lost one percent. About two shares declined for every share advancing on the BSE.

The Reserve Bank of India left policy rates unchanged . It also kept credit growth, deposit growth and M3 growth estimates for FY14 unchanged, but lower GDP growth forecast to 5.5 percent from 5.7 percent for current financial year 2013-14.

Havells India shares crashed more than 8 percent after lower than expected numbers on all parameters during June quarter.

Empowered group of ministers approved offer for sale (OFS) of National Fertilisers. Divestment secretary says that the floor price for OFS will be declared today evening.

Indian rupee depreciated further today by 41 paise to 59.82 against the dollar. It was also down 39 paise in previous session.

12:00 pm Market stats: Selling pressure creeps into the equity market, the Nifty slips closer to 5800. Commodities and rate sensitives drag. But the cuts are bigger for the midcap index, down nearly a percent. JP Power, Manappuram, Dish TV all down over 5 percent each.

11:50 am The Group of Ministers on revival of loss making telecom companies BSNL and MTNL is likely to focus on spectrum related issues, cumulatively amounting to about Rs 23,000 crore of these state-run telecom firms in their meeting scheduled for August 1, reports PTI.

"Among few selective points that we have seen, DoT has included spectrum related issues for discussion in this meet," a government official said.

11:40 am Oil update: Brent crude futures remained steady above USD 107 a barrel as investors looked to a Federal Reserve meeting for clues on the outlook for the US monetary stimulus programme that has bolstered demand in the world's No.1 oil consumer, reports Reuters.

Investors also avoided taking big positions ahead of key economic data this week including US payroll numbers and manufacturing from China, the world's second largest oil consumer.

11:30 am Earnings impact: Havells India disappointed street (stock down 5 percent on BSE) with its April-June quarter earnings. Its consolidated net profit fell to Rs 87 crore from Rs 71.2 crore year-on-year.  Total income during the period stood at Rs 1823 crore from Rs 1778 crore Y-o-Y.

Analysts on an average expected consolidated total income to increase 9.7 percent Y-o-Y to Rs 1,950 crore and profit after tax up by 55 percent Y-o-Y to Rs 123 crore during the same period due to lower interest cost.

11:20 am Bond market: India's benchmark 10-year bond yields and overnight index swap (OIS) rates fell after the central bank left both interest rates and the cash reserve ratio on hold at its policy review, although the rupee weakened slightly, reports Reuters.

Benchmark 10-year bond yields dropped 13 basis points to 8.03 percent from levels before the Reserve Bank of India announced its decision.

11:15 am Q1 Monetary Policy Review:

RBI Says

• To endeavour to bring down inflation to 5 percent by March 2014
• To roll back liquidity steps in calibrated manner
• To roll back recent steps once stability restored in forex market
• Current account deficit (CAD) above 2.5 percent of GDP for 3 years a structural risk factor
• Rising external vulnerability calls for credible fiscal consolidation
• Investment climate remains weak
• Expect rupee fall to be passed on to fuel, non-food manufacturing inflation
• Priorities for RBI: rupee, growth, inflation
• Fed intrigue, not policy, has market attention for now

As expected, the Reserve Bank of India keeps key rates unchanged in its monetary policy review. The central bank sounded more dovish in its commentary. As a response, the Sensex gains 39.75 points at 19633.03, and the Nifty jumps 19.65 points to 5851.30. About 636 shares have advanced, 913 shares declined, and 115 shares are unchanged.

Meanwhile the RBI's macroeconomic report had earlier said that currency stability is its top priority. It also adds that steps to tighten liquidity will give the government space to make structural reforms to lower the current account deficit.

However, experts feel that market attention will mostly be on the Federal Reserve's two-day meeting , which starts today and may give an indication of when the central bank's massive asset purchase program will be tailed back. The Bank of England and the European Central Bank will also meet this week.

10:45am Buzzers: Jaypee Infratech shares crashed more than 5 percent after disappointing earnings in June quarter. Big surge in interest costs dragged profitability lower by 61 percent to Rs 81 crore from Rs 210 crore due to interest cost while revenues rose by 13.4 percent Y-o-Y to Rs 769.2 crore and operating profit margin has risen to 43.5 percent versus 40.1 percent.

Jet Airways gained another 1 percent after the FIPB has given a conditional nod to the Jet-Etihad deal.

Jaiprakash Associates plunged 4.5 percent post disappointing earnings. The stock is down 27 percent this month. Citi has downgraded the stock to neutral and cut its target price to Rs 48 from Rs 81 and cut FY14e-15e EPS estimates 36-37 percent.

Shares of Fresenius Kabi Oncology surged 3 percent after the Foreign Investment Promotion Board (FIPB) cleared six proposals envisaging investments of Rs 855 crore in the pharmaceutical sector, including Fresenius Kabi.

10:30am Results Reactions: Geometric shares plunged more than 12 percent post lacklustre earnings in April-June quarter. Dollar revenue has grown just 1.4 percent to USD 46 million while margins have improved to 19.2 percent versus 13.5 percent, but that is on the back of a very low base. Net profit of the company has come in at Rs 15.4 crore as against Rs 11.1 crore Q-o-Q due to a forex gain of Rs 15.4 crore during the quarter.

Prestige Estates rallied 2.5 percent after strong earnings in first quarter. Revenues rose by 2.2 times Y-o-Y to nearly Rs 500 crore, but margins slipped to 26 percent versus 32 percent due to lower sales mix changing in favour of low margin projects like Tranquility in Bangalore. PAT has risen to Rs 87 crore from Rs 49.2 crore.

Irfan Razack, CMD of Prestige Estates says that the company is on track to achieve sales guidance of Rs 4,300 crore in FY14. "We will continue to maintain realisation at Rs 5,800 per square feet."

JP Morgan has an overweight rating on the stock with a target of Rs 250 while Macquarie maintained it's outperform stance, but cut target to Rs 175 from Rs 225 earlier.

10:20am The market remained lacklustre from early trade today with the Nifty hovering around 5830 level ahead of RBI's monetary policy. The BSE Bankex too is flat.

The BSE Sensex is down 9.23 points at 19584.05, and the Nifty is up 0.70 points at 5832.35, but the broader markets underperformed benchmarks.

The BSE Midcap Index lost 0.6 percent and Smallcap declined 0.4 percent. Declining shares outnumbered advancing ones by 887 to 583 on the BSE.

Any rally in the market will now depend on today's Reserve Bank's policy meet , says UR Bhat of Dalton Capital. In an interview to CNBC-TV18, he says Indian equities will take cues from RBI's commentary and developments in global markets.

Country's largest lenders State Bank of India and ICICI Bank were flat while their rival HDFC Bank declined 0.6 percent.

Jindal Steel shares gained more than 3 percent on top of previous day's 5 percent gains ahead of first quarter earnings today. According to a CNBC-TV18 poll, the company may post a 69 percent growth in profit after tax at Rs 650 crore year-on-year.

10:00 am Movers and losers: Jindal Steel , Sun Pharma , Infosys , TCS and L&T are top gainers in the Sensex while HUL , GAIL , Strelite, Bajaj Auto and Bharti Airtel are major laggards.

9:50 am Buzzing: Prestige Estates Projects shares rallied 5.5 percent in early trade Tuesday as Macquarie has an outperform rating on the stock with a target price of Rs 175 after strong Q1 earnings.

According to the brokerage, the company appears to be on track to achieve its guidance for pre-sales and launches for FY14, having delivered over 25 percent in the first quarter.

9:45 am Market outlook: Any rally in the market will now depend on today's Reserve Bank's policy meet, says UR Bhat of Dalton Capital. In an interview to CNBC-TV18, he says Indian equities will take cues from RBI's commentary and developments in global markets.

The market is hovering near the 200-day-moving-average (DMA) and may fall quite significantly if there is a lack of positive newsflow, he cautions. He expects the market to be volatile in the 5600-6000 range.

Bhat adds that FII inflows into the market are not anywhere around the corner due to global slowdown. "All over the world we have huge problems with the economy. There is a risk-off trade that is likely to continue for some more time and we should be happy if there are no great outflows from India," he adds.

9:40 am Gainer: Jindal Steel and Power gains 4 percent on the expectation of a strong April-June quarter earnings.  It is likely to post around 69 percent year-on-year jump in June quarter profit to Rs 650 crore, states a CNBC-TV18 poll. Sales are also estimated to be up around 8 percent to Rs 5060 crore Y-o-Y.

However,  EBITDA margins are likely to shrink to 28.7 percent against 33.6 percent.

9:35 am Buzzing: Fresenius Kabi Oncology is up 4.5 percent on the BSE. The FIPB cleared six pharma proposals worth Rs 855 crore including Fresenius Kabi

9:30 am Macro outlook: Leif Eskesen of HSBC expects RBI to hold key rates unchanged today.

He told CNBC-TV18, the growth backdrop is not very encouraging, global as well as domestic. The monetary policy will have to address the pressure on the rupee. On the inflationary front, though the WPI has come down in the last few weeks, CPI remains a concern and sticky at double digit levels. This is turn implies broader inflationary expectations. The weakness in the currency too adds to the mix.

9:25 am Big leader: Jet Airways (up around 4 percent on the BSE) is in focus today, as Foreign Investment Promotion Board (FIPB) gives the Jet-Etihad deal a conditional nod . Aviation Minister Ajit Singh says stock market regulator, Sebi has also cleared the deal and the matter will soon go to Cabinet Committee on Economic Affairs (CCEA) for its final stamp of approval.

The market opened flat with the Sensex at 19614.45, up 21.17 points. The Nifty is up 7.40 points at 5839.05. About 169 shares have advanced, 79 shares declined, and 33 shares are unchanged.

All eyes will be on Reserve Bank of India's credit policy today. A CNBC TV18 poll sees no action in the policy while the market will look forward to indications from RBI on when the tight money rules will be rolled back. Meanwhile the RBI's macroeconomic report says currency stability is its top priority. It also adds that steps to tighten liquidity will give the government space to make structural reforms to lower the current account deficit.

The Indian rupee opened weak by 21 paise at 59.62 per dollar against 59.41 Monday. Jayesh Mehta, Bank of America said, "The rupee is expected to trade on a weaker note on RBI's hawkish comments. Key policy rates are likely to be unchanged in today's policy. The range for the day is seen between 59.40-59.70/USD."

Prime Minister Manmohan Singh reaches out to India Inc to allay concerns about the economy. He assures them that the impact of growth friendly measures will be seen in the second half of the current fiscal.

However, market attention will mostly be on the Federal Reserve's two-day meeting, which starts today and may give an indication of when the central bank's massive asset purchase program will be tailed back. The Bank of England and the European Central Bank will also meet this week.

In the currency space, the euro stays above 1.32 to the dollar. The dollar index is around 81.70 levels. The dollar yen is at 98 mark.

In commodities, crude under pressure on demand worries plus a stronger dollar. Brent crude hovers around USD 107 per barrel. From precious metals space, gold prices are steady, trading around 1330 dollars an ounce ahead of the FOMC meet.