Markets remain robust inspite of hike in CRR

Mumbai, July 31 (UNI) Notwithstanding Reserve Bank of India's (RBI) decision to hike the CRR (cash reserve ratio), the Bombay Stock Exchange (BSE) Sensex surged by 148.39 points till early afternoon today to touch 15,409.30 from its previous close of 15,260.91, after opening firm at 15,358.69 tracking robust Asian and global markets.

The National Stock Exchange (NSE) Nifty also advanced by 47.40 points at 4487.45 from it's previous close of 4,440.05 after opening firmer at 4,444.25.

''The RBI today increased the CRR (cash reserve ratio) by 50 bps to 7 per cent from 6.5 per cent (100 bps is equal to 1 per cent). Reverse Repo cap was removed. Bank shares saw trend reversal from the initial firmness. Cement shares vaulted on momentum buying,'' analysts noted adding that the market breadth was strong on the BSE with a little under 1.5 gainers for every loser, as small-cap and mid-cap stocks attracted buying interest.

1,480 shares advanced as compared to 1,002 that declined, while 76 remained unchanged. The BSE Mid-Cap index was up 0.13 per cent to 6,627.53, while the BSE Small-Cap index gained 0.52 per cent to 7,983.26. The total turnover so far amounted to Rs 2,554 crore.

Among the Sensex pack, 18 advanced while the rest declined, BSE data revealed.

''CRR is the amount that commercial banks need to maintain with the RBI. The amount is based on a fixed percentage computed on each bank's total time and demand liabilities. The CRR imposes a cost on the banking system. This is because banks do not receive more than 6.5 per cent interest on the CRR, while they earn higher returns if the money is lent to customers or invested in bonds,'' analysts explained.

The early laggards included ICICI Bank, Bank of Baroda, Union Bank of India, Vijaya Bank, Federal Bank, State Bank of India, Andhra Bank, Mahindra&Mahindra, Maruti Udyog, and Tata Motors, while the leaders included ACC, Ambuja Cements, India Cements, Ultra Tech Cement Company, ITC, Ranbaxy Laboratories, Bharat Heavy Electricals (Bhel) and Reliance Industries (RIL).

Asian markets gained in volatile trade today. Hong Kong's Hang Seng, Taiwan Weighted, Singapore's Straits Times and South Korea's Seoul Composite edged higher.

Japanese Nikkei slipped 0.22 per cent at 17,251.22 and Shanghai Composite was up 0.48 per cent to 4,462.63.

Wall Street found a foothold yesterday. The Dow Jones advanced 92.84 points, or 0.70 per cent, to 13,358.31. Broader stock indicators also posted gains. The Standard&Poor's 500 index added 14.96 points, or 1.03 per cent, to 1,473.91, and the Nasdaq Composite index advanced 21.04 points, or 0.82 per cent, to 2,583.28.

Oil prices were little changed today, with US crude still within sight of its record high as traders feared further declines in hefty US crude stocks. US crude eased 16 cents to USD 76.67 a barrel.

London's Brent crude slipped 14 cents to USD 75.60 a barrel.

UNI