BSE Sensex flat: RBI review in focus

July 27, 2010 6:08 AM EDT

The BSE Sensex was trading barely changed on Tuesday as investors were cautious ahead of the Reserve Banks's quarterly policy review announcement expected at 0600 GMT.

A Reuters poll last week showed majority of economists expect the Reserve Bank of India (RBI) to raise interest rates by 25 basis points (bps) and tighten policy further in coming quarters.

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The 30-share BSE index was trading up 0.02 percent at 18,023.02 points, with two-thirds of its components advancing.

"People are just nervous before the (central bank) policy," said Arun Kejriwal, director of research firm KRIS.

Kejriwal expects a 25 bps hike in key interest rates and a hawkish stance from the RBI.

"Monsoon is improving which is good. But looking at the recent earnings, we are seeing input cost pressures. For banks, asset quality is getting to be a worry."

Total rainfall since June 1, the start of the vital, four-month monsoon season was 16 percent below normal on July 19, but the seasonal deficit narrowed to 7 percent on Monday, data from the India Meteorological Department showed.

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The benchmark index is up 3.2 percent year to date.

Foreign funds have poured in $9 billion in Indian equities so far in 2010, a portion of which was invested in primary market.

Financials were mixed ahead of the Reserve Bank of India policy announcement.

Leading lender State Bank of India rose 0.1 percent while rival ICICI Bank dropped 1.3 percent.

Mortgage lender Housing Development Finance Corp was trading 0.1 percent lower.

Energy giant Reliance Industries led the gains ahead of its quarterly earnings announcement.

Reliance Industries, which has the highest weight on the main index, was up 0.5 percent. According to a Reuters poll, Reliance may report a net profit of 48.3 billion rupees.

Top power producer NTPC declined 0.9 percent as it reported a 16-percent drop in its June quarter net profit, after market hours on Monday.

Top engineering and construction firm Larsen & Toubro was down 2.6 percent, as it details its June-quarter earnings later in the day, while Hindustan Unilever, which also declares its quarterly numbers, firmed 0.9 percent.

In the broader market, gainers led losers in a ratio of 1.1:1 in a volume of 82 million shares.

The 50-share NSE index was barely changed at 5,415.70 points.

STOCKS ON THE MOVE

Software firm Tech Mahindra was down 3.4 percent at 712.50 rupees after it reported a 9.1-percent rise in its June-quarter net profit which did not meet expectations, dealers said.

JPMorgan downgraded the stock to "neutral" from "overweight", while BNP Paribas cut its rating to "hold" from "buy".

Mahindra Holidays dropped 4.9 percent to 518.55 rupees, after the hospitality services provider said its June- quarter net profit declined 61 percent.

Motorcycle maker Hero Honda bounced back 3.1 percent to 1,868.70 rupees, after it had dropped 7.5 percent in the previous session.

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