Key equity indices sharply pared gains in morning session. The Nifty pared gains after registering another fresh record high level of 12,293.90. Banking stocks were in action after the Reserve Bank of India (RBI) announced special OMO purchase and sale of Govt securities.
At 10:32 IST, the barometer index, the S&P BSE Sensex, was up 25.41 points or 0.06% at 41,699.33. The Nifty 50 index was up 9.05 points or 0.07% at 12,268.75.
Shares in the broader market outperformed the main stock indices. The S&P BSE Mid-Cap index was up 0.24%. The S&P BSE Small-Cap index was up 0.16%.
The market breadth was positive. On the BSE, 976 shares rose and 773 shares fell. A total of 117 shares were unchanged. In Nifty 50 index, 38 stocks advanced while 12 stocks declined.
The Reserve Bank of India (RBI) on on Thursday (19 December) said it will simultaneously buy and sale government securities worth Rs 10,000 crore each on 23 December under its open market operations (OMO), a move aimed at managing the yields. RBI said it will buy Rs 10,000 crore of 6.45% government bonds maturing in 2029 and simultaneously sell Rs 10,000 crore of short-term bonds maturing in 2020.
Meanwhile, the minutes of the last meeting of RBI’s Monetary Policy Committee (MPC) were released on Thursday (19 December). RBI’s MPC at its last meeting on 5 December 2019 decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15%. Consequently, the reverse repo rate under the LAF remained unchanged at 4.90%, and the marginal standing facility (MSF) rate and the bank rate at 5.40%.
According to the minutes, the RBI remains concerned about the slower pace of rate cut transmission in the economy while the sudden spurt in food inflation, though seasonal, seems to have put policy makers at the central bank on alert.
RBI Governor Shaktikanta Das said that the impact of recent counter-cyclical measures taken by the government was starting to play out, while stressing that it was imperative that monetary and fiscal policies should work in close coordination.
The MPC, which decides on the benchmark policy rate of RBI, comprises six members, three from the central bank and three others appointed by the central government.
The yield on 10-year benchmark federal paper tumbled to 6.608% at 10.40 IST compared with 6.746% at close in the previous trading session.
The Nifty Bank index was up 0.26% at 32,324 after bond yields tumbled.
Among private sector banks. Yes Bank (up 3.11%), RBL Bank (up 2.06%), ICICI Bank (up 1.04%), IndusInd Bank (up 0.43%), Federal Bank (up 0.4%) and AU Small Finance Bank (up 0.08%) surged higher.
Among PSU banks, Syndicate Bank (up 3.13%), Union Bank of India (up 2.9%), Bank of Maharashtra (up 2.59%), Oriental Bank of Commerce (up 2.45%), Canara Bank (up 2.44%), SBI (up 2.33%), Bank of Baroda (up 1.73%), Punjab National Bank (up 0.94%) and Bank of India (up 0.56%) were top gainers in PSU segment.
Commercial banks in India are required to hold a part of their deposits in government securities. A spike in bond prices, which move inversely to yields, will boost the value of bond holdings of banks. Profits from trading in government bonds form a substantial part of revenue of commercial banks.
Stocks in Spotlight:
Dishman Carbogen Amcis slumped 6.1% after it informed about the search inquires conducted by IT Authorities at the company’s premises. In a exchange filing made post trading hours yesterday, company said that the officials of the Income-Tax Department have visited the company’s head offices and manufacturing sites in connection with search under Section 142 of the Income-Tax Act on 19 December 2019 and search enquiry is continuing.
Infrastructure developer Kolte Patil gained 1.82% after Pabrai Group increased stake from 7.09% to 9.23%. The mode of acquisition was through Open Market.