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Markets take a sharp dip on rate hike
July, 26th 2011

The markets have taken a sharp hit after the Reserve Bank of India (RBI) announced an unexpectedly higher rate hike in its policy review today. The RBI hiked key rates by 50 basis points as against analyst expectation of 25 basis points. The markets which were trading firm, have taken a sharp dip now. The Sensex has tumbled over 200 points to 19,600-odd levels.
(Updated at 0940 hrs)

Markets were trading flat after opening higher as investors turned to the sidelines ahead of Reserve Bank of India policy around 11:00 hrs today.

The Nifty touched a high of 5,702 in opening trades and was trading flat at 5687, up 4 points at 09:45 hrs. The BSE benchmark Sensex was trading at 18,884, up 10 points.

Asian markets were lacklustre on Tuesday morning as stalemate over the US debt deal kept investors on the edge. Japans Nikkei Stock Average was trading flat, at 10,054. Hong Kongs Hang Seng gained 0.7%, but Chinas Shanghai Composite declined 0.2%.
Back in India, economists expect the Reserve Bank of India to raise interest rates by 25 basis points during the policy today. Another hike is possible in September if the central banks want to ensure that the sting is well and truly out of inflation's tail," said HDFC Bank in the weekly note. In the latest macro-economic report also RBI said that the monetary tightening will continue, until there is enough evidence of inflation trending closer to the comfort zone of 4-4.5%.

The index heavyweight Reliance Industries was trading down 0.1%, at Rs 881 after the June quarter earnings missed analysts expectations by a small margin. The oil & gas conglomerate reported highest ever net profit on back of improvement in refining margins which offset lower gas production from KG D6 basin.

Net profit surged 17% to Rs 5661 crore against Rs 4851 crore reported during the same time last year. Reuters poll estimated net profit at Rs 5,720 croe. Gross refining margin-profit from converting crude into refined product increased to $10.3 per barrel versus $7.33 per barrel during the same time last year.

Analysts expect RIL to improve gas output with the expertise available from British Petroleum. Deven Choksey, MD from KR Choksey said, With the BP deal, RIL will get access to higher production capacities, leading to higher gas output. Cash on balance sheets will help the company generate higher amount of growth from inorganic acquisitions.

India's largest car maker Maruti Suzuki slipped 0.3% and power gear maker BHEL advanced 1% ahead of June quarter results today.
On the sectoral front, BSE Healthcare index and BSE Capital Goods index were leading the up move.

From the healthcare space, Glenmark Pharma added 4.2%, Sun Pharma advanced 1.7% and Opto Circuits was up 1.5%. Top gainers from the Capital Goods sectors were Praj Industries, up 1.7%, Gammon India was up 1% and Thermax added 0.9%.

From the broader markets, the midcap and the smallcap indices were up 0.3% each.

Top gainers on the Sensex were Sterlite, up 1.5%, Hero Honda gained 1.1% and Reliance Infrastructure surged 0.5%. Prominent losers were Reliance Communication, down 1.9%, Bharti Airtel declined 1.1% and ITC was down 0.2%.

From the broader market, 819 stocks advanced for 382 stocks which declined.

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