Nifty Slips

Indian equities opened on a positive note mirroring global cues. However, it soon slipped into the red. Oil & gas, banks trades lower while some buying was seen in auto, metal, banks, capital goods stocks. Brent Crude was trading at USD 116 per barrel.

Among frontliners, Hindalco, Cairn India, HUL, HDFC, ICICI Bank, Tata Steel, Ambuja Cements, Rel Com, Rel Power, Rel Infra, Maruti and ONGC were the top gainers, while losers include heavyweight names like Reliance Industries, TCS and BPCL.

At 09.17 am, the Sensex was up 101.31 points or 0.56% at 18251.18, and the Nifty was up 19.75 points or 0.36% at 5466.40.

About 631 shares advanced, 156 declined, and 2583 shares remained unchanged. Gautam Shah, JM Financial said that, "The mini 'Channel' pattern continues to be applicable on the charts with resistance seen at 5560 and support around 5370 on the Nifty. A breakout in any direction may lead to a 100-point move. Our bias continues to be on the downside. A close above the 5640 on the Nifty and 18800 on the Sensex is required to confirm a trend reversal."

Aditya Narain of Citigroup believes that the unfortunate earthquake in Japan should have a fairly limited impact on Indian market. "India's exports to Japan are small. However, we believe the possible indirect impact on India's nuclear energy policy, the reaction of Japanese businesses regarding Indian operations and investment and Japanese capital flows into India could have a greater bearing over time."


Asian markets were trading higher in the morning. They were up in the range of 0.5-1.5%.
The US markets broke the 3-day losing streak on speculations that Japan will control the nuclear crisis. The CBOE volatility index fell 9% versus 20% on Wednesday. Positive economic data also provided a fresh impetus to the markets.


Dow Jones Industrial Average added 1.39% or 161.29 points at 11774.59. Nasdaq Composite gained 0.73% or 19.23 points at 2636.05. Standard & Poor's 500 rose 1.34% or 16.84 points at 1273.72.


F&O cues:

Total Futures Open Int down Rs 183 cr, Total Options Open Int up Rs 659 crore
Total stock futures Open Int add 75 lakh shares in Open Int
Nifty futures Open Int add 2.34 lakh shares in Open Int, prem at 20 pts versus prem of 12 pts because of massive cash based selling
Nifty Open Int PCR down at 1.25 versus 1.33 -Total Put shed 19.7 lakh shares, call add 26 lakh shares
Highest Open Int outstanding at 5400 put, 5300 put, 5500 call
Nifty 5500 call add 10.5 lakh (16%) shares in Open Int
Nifty 5600 call add 7.4 lakh (12%) shares in Open Int
Nifty 5400 call add 4.2 lakh (13%) shares in Open Int
Nifty 5400 Put shed 14.3 lakh (13%) shares in Open Int
Nifty 5500 put shed 12.5 lakh (22%) shares in Open Int
Nifty 5100 Put shed 3 lakh (5%) shares in Open Int
Nifty 5600 put shed 1.8 lakh (8%) shares in Open Int
Nifty April 5500 Put add 1.88 lakh (21%) shares in Open Int
Nifty April 5800 call add 1.27 lakh (8%) shares in Open Int
India VIX up 1.5% at 25.26; Orchid and Suzlon in FNO Curb 




Market cues:

Global markets recover post G7's Joint Intervention; yen falls nearly 3% against USD. FIIs net sell USD 27.6 million in the cash market on Mar 16. MFs net buy Rs 286 crore in the cash market on Mar 16. NSE F&O Open Int was up Rs 476 cr at Rs 1.39 lakh crore

Banks hike lending rates after RBI rate hike?

The Reserve Bank of India (RBI) hiked its key policy rates by 25 basis points -- the seventh time this financial year 2010-11. Over the last year, the central bank has raised repo rate and reverse repo rates by 175 bps to 6.75% and 225 bps to 5.75% respectively. Repo is the rate at which banks borrow from RBI and reverse repo is the rate at which banks park their surplus money with RBI.

Following the latest hike, bankers expect lending rates to rise once more before the slack season kicks off. But depositor may have little to cheer about as bankers feel deposit rates may have peaked for the time being. Most banks are offering rates between 9.25 and10.25%.

The non-food credit growth of the banking industry has already surpassed RBI’s indicative projection of 20%. It is currently at around 23% for the fortnight ended February 25, 2011.
Here is a synopsis of the existing lending rates of some frontline banks:

Banks	Base rate	BPLR
Allahabad Bank	9.50% (50 bps)	13.75% (25 bps)
Bank of Baroda	9.50% (50 bps)	13.75% (50 bps)
Central Bank of India	9.50% (50 bps)	13.75% (50 bps)
Corporation Bank	9.40% (50 bps)	13.60% (35 bps)
Dena Bank	9.45% (50 bps)	14.50% (75 bps)
Dhanlaxmi	8.75% (50 bps)	17.25% (75 bps)
HDFC Bank	8.70% (50 bps)	17.25% (75 bps)
ICICI Bank	8.75% (50 bps)	17.50% (50 bps)
IDBI Bank	9.50% (50 bps)	14.00% (25 bps)
Indian Bank	9.50% (50 bps)	13. 75% (50 bps)
IOB	9.00% (50 bps)	13.25% (25 bps)
Kotak Mahindra Bank	8.75% (50 bps)	17.50% (50 bps)
PNB	9.50% (50 bps)	13.00% (50 bps)
SBI	8.25% (25 bps)	13.00% (25 bps)

Commercial banks are not permitted to lend below base rate. However, old customers of banks still continue to repay their loan with BPLR. Banks’ efforts are on to convert their old BPLR customers into base rate system.

Sensex Erases yesterday's Gains

The Sensex shaved off yesterday's gains at 13:43 hours on the back of sell-off in Reliance Industries, TCS, HDFC, Infosys, ICICI Bank, NTPC, ITC, SBI and Bharti Airtel. Crude turned back above USD 111.5 a barrel could be another reason behind this fall in the afternoon trade.

"Anything that causes unrest in Saudi Arabia or causes a supply side event in the Middle East will cause a sharp rebound in prices," National Australia Bank commodity economist Ben Westmore said. But Japan continues to weigh on the market after that massive earthquake followed by tsunami and blasts in nuclear plants in northern region devastated Japan.

"There is so much uncertainty in Japan and its ability to drive economic recovery that it's something that is casting a shadow on the outlook for global growth," said Westmore.

But the market remained unaffected by the rate hikes as it already factored in the 25 basis points hike in repo and reverse repo rates by the Reserve Bank of India to control inflation.

"Based on the current and evolving growth and inflation scenario, the Reserve Bank is likely to persist with the current anti-inflationary stance," RBI said in its mid-quarterly review announced today.

Raamdeo Agrawal, Joint MD Motilal Oswal Financial Services Ltd said RBI has acted on expected lines. "Problem of inflation is still on top of RBI’s mind, so they have continued tightening monetary policy even at the cost of growth momentum slackening”.

The 30-share BSE Sensex fell 192 points to 18,166 and the 50-share NSE Nifty slipped 58 points to 5,452 Even the market breadth was in favour of declines; about 500 shares advanced as against 761 shares declined on National Stock Exchange.

RBI raises repo rate

As widely expected the Reserve Bank of India raised repo (rate at which it lends to banks) and reverse repo (rate at which it borrows) rates by 25 basis points each, taking the repo to 6.75% and reverse repo to 5.75%. However, the CRR has been left unchanged at 6%.

The bank also raised March-end inflation forecast to 8% from 7% earlier, leaving GDP growth forecast unchanged at 8.6%. RBI, in its mid-term credit policy said that rising commodity prices was adding to GDP and inflation risk.

A CNBC-TV18 poll of bankers and economists had shown that 70% of those polled expected the RBI to hike the repo rate by 25 bps to 6.75% and 65% expected a 25 bps hike in the reverse repo rate to 5.75%.

Credit Policy: Will RBI pause or raise rates?

Industrial growth is slowing and so is inflation. In circumstances like these should the RBI pause or does it need to raise rates yet again on March 17? CNBC-TV18's Gopika Gopakumar and Vidhi Godiawalla find out what bankers and economists are expecting.

RBI Governor D Subbarao is clearly in a dilemma over inflation management and growth. But Inflation control is expected to remain the central bank's focus in its mid-quarter review on March 17. He said, “For inflation management, we have to raise policy interest rates. For protecting, promoting and preserving recovery, we need to keep interest rates low.”

A CNBC-TV18 poll of bankers and economists shows that 70% of those polled expect the RBI to hike the repo rate by 25 bps to 6.75%. 65% expect a 25 bps hike in the reverse repo rate to 5.75%.

Samiran Chakrabarty, Head of Research at Standard Chartered, said, “RBI till now has clearly communicated the stance that they want to balance between growth and inflation and that's why they want to take a calibrated stance that they want to raise rates. From that perspective 25 bps hike seems to be on the cards.”

The street is more or less convinced that inflation for March-end will come in higher than RBI has forecasted, which is 7%. 80% of the respondents expect March-end inflation to be above 7%; while only 20% see it at 7% or lower.

With the liquidity situation stabilizing, majority believe the RBI will not extend the facility of extra borrowing that banks can do up to 1% of SLR beyond April 8.

So how will actual lending and deposit rates move after the policy?

Majority believe banks will not hike lending or deposit rates immediately even if the RBI moves on policy rates.

Ramnath Pradeep, CMD of Corporation Bank, said “Incase there is an increase in the repo rate and reverse repo rate by may be 25 bps, I think to pass on to the borrowing will be difficult as peak level of the rate has reached on deposit side, so, now to pass on this hike in rate of interest, there could be a question of sustainability.”