UPDATE 1-Indian shares fall; RBI cautious on further rate cuts

Tue Jan 29, 2013 6:03pm IST

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Stocks

   

* BSE index falls 0.56 pct; NSE ends 0.41 pct lower
    * State-owned banks, realty stocks fall on RBI's guidance
    * Axis Bank shares gain; stake sale attracts strong demand

 (Adds indexes hit two-year intraday high)
    By Abhishek Vishnoi
    MUMBAI, Jan 29 (Reuters) - Indian shares fell to a one-week
low on Tuesday, led by a decline in rate-sensitive stocks such
as HDFC Bank, after India's central bank lowered its key policy
rate, but made further rate cuts conditional on government moves
to control fiscal deficit.
    The Reserve Bank of India cut the policy repo rate
 by 25 basis points to help support an economy set
to post its slowest annual growth rate in a decade, and even
unexpectedly reduced the cash reserve ratio (CRR) to
address the country's liquidity deficit. 
    The central bank stressed that halting a slide in growth had
become critical, but it went on to list constraints, notably
worryingly high current account and fiscal deficits, and the
risk that inflation could flare again. 
    The cautious call led indexes to pull back after earlier
hitting their highest in two years since January 2011
immediately after the RBI decision.
    Analysts said the government's upcoming budget for the
fiscal year starting in April would be key in determining the
markets' near-term outlook. 
    "Policy was broadly in-line with market expectations, but
there has been a sense of caution mainly due to widening current
account deficit and inflation," said Kaushik Dani, Fund Manager
at Peerlees Mutual Fund.
    "The way budget pans out will determine how RBI formulates
its March policy," added Dani.    
    The benchmark BSE index fell 0.56 percent, or
112.45 points, to end at 19,990.90, closing below the
psychologically important 20,000 mark. 
    The index had earlier gained as much as 0.5 percent to its
highest intraday since Jan. 6, 2011.
    The broader NSE index fell 0.41 percent, or 24.90
points, to end at 6,049.90, marking its lowest close in a week
after earlier also hitting a two-year high.
    RBI's caution comes ahead of what is expected to be a
volatile week, with continued earnings results and the expiry of
derivatives on Thursday, while the Federal Reserve is set to
conclude its two-day meeting on Wednesday
    Rate-sensitive stocks fell after the RBI made further rate
cuts conditional on government's efforts towards fiscal
consolidation, making hopes of aggressive easing cycle this year
highly improbable.
    Among banking stocks, HDFC Bank fell 2.7 percent ,
while State Bank of India ended 1.2 percent lower.
    Real estate developer DLF fell 1.2 percent, while
Tata Motors fell 1.4 percent.
    Oil and gas stocks declined on profit-taking, with Oil and
Natural Gas Corp Ltd falling 0.5 percent, having
gained 25 percent in January after the government's move to
allow higher diesel prices and due to expected changes to gas
pricing. 
    Reliance Industries fell 1.6 percent, marking its
fourth day of losses, on fresh concerns over its gas output from
KG D6 block, dealers say. 
    Century Textiles & Industries Ltd shares ended 3.9
percent lower after the company reported a loss of 291.9 million
rupees in Oct-Dec earnings.  
    However, among stocks that gained, India's Axis Bank
 ended 4.4 percent higher as dealers cited good demand
for a share sale of up to $1 billion. 
    Adani Ports and Special Economic Zone Ltd rose 6.6
percent after the company said it would sell a majority stake in
Australia's Abbot Point port to the Adani family.
 
    Adani Port's stake sale in its Australian port would reduce
the Indian company's consolidated debt by around 110 billion
rupees ($2.04 billion), while the reinvestment of the cash flows
for domestic growth opportunities would be a positive, brokerage
Edelweiss says in an email to clients.
    Idea Cellular shares ended 0.9 percent higher
ahead of earnings, later in the day. 
    
    For additional stocks on the move double click       
     
   FACTORS TO WATCH                                             
* Euro steadies vs dollar, scope for rally to resume      
* Brent holds steady above $113 on positive U.S. data      
* Shares, oil steady before U.S. data, Fed meeting   
* Foreign institutional investor flows          
* For closing rates of Indian ADRs                       
                       
   ASIA-PACIFIC STOCK MARKETS:                                  
Pan-Asia........ Japan.......   S.Korea... 
S.E. Asia.......        Hong Kong...  Taiwan.... 
Australia/NZ....        India.......  China..... 
                        
   OTHER MARKETS:                                               
Wall Street ....         Gold ....... Currency.. 
Eurostocks.....         Oil ........  JP bonds... 
ADR Report .....       LME metals. US bonds.. 
Stocks News US.. Stocks News Europe     
                       
   DIARIES & DATA:                                              
Indian Data Watch   Asia earnings diary 
U.S. earnings diary     European diary       
Indian diary          Wall Street Week Ahead  
Eurostocks Week Ahead                                   
                         
   TOP NEWS:                                                    
   For top Asian company news, double click on:       
   U.S. company news  European company news  
   Forex news        Global Economy news  
   Technology news  Telecoms news        
   Media news       Banking news           
   Politics/General    Asia Macro data      

 (Additional reporting by Manoj Dharra; Editing by Anand Basu)
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