Cautious Nifty ends flat ahead of RBI policy; BHEL tanks 6%

Indian shares closed flat amid volatility on Monday as investors looked cautious ahead of half-yearly monetary policy review by the Reserve Bank of India (RBI) tomorrow.

The market gained more than 100 points in early trade following the reshuffle of cabinet ministers yesterday. But that could not sustain for long as the market turned volatile ahead of policy meet. The 30-share BSE Sensex rose 10.48 points to close at 18,635.82 while the 50-share NSE Nifty went up 1.30 points to 5,665.60.

The gains in Reliance Industries, ITC, HDFC Bank, Wipro, Bharti and Infosys were counterbalanced by the fall in BHEL, L&T, ICICI Bank, Tata Motors, TCS and HDFC.

Majority of experts feel the central bank will go for 25 basis points cut in repo rate and cash reserve ratio.

Edelweiss Securities, in its preview report, said they expect RBI to reduce both CRR and repo rate by 25 basis points.

"While the CRR cut will largely pre-empt liquidity tightening in the busy credit season, the central bank will reduce repo rate by 25 bps to complement recent government actions and bolster the faltering economy. We argue that better-than-expected monsoon season, INR appreciation and downward pressure on global commodity prices, along with government’s fiscal tightening initiatives (politically difficult decision of fuel price hike) have created room for RBI’s actions," Edelweiss explained.

The Indian rupee fell by 45 paise to close below the 54 level at 54.01 against the US dollar at 15:31 hours IST.

State-run power equipment maker BHEL plunged 6.19 percent following disappointing quarterly earnings on every count. Profit after tax slipped 9.7 percent YoY to Rs 1,274 crore as against expectations of Rs 1,446 crore. Even its order book dropped to Rs 1.22 lakh crore in the quarter ended September 2012 from Rs 1.33 lakh crore in previous quarter.

India's largest private sector lender ICICI Bank was down 0.9 percent while its rival State Bank of India ended flat to negative. HDFC Bank gained 0.5 percent.

Commercial vehicle maker Tata Motors dropped 1.8 percent while utility vehicle maker Mahindra & Mahindra, two-wheeler majors Hero Motocorp and Bajaj Auto gained 1-2 percent.

FMCG major Hindustan Unilever shed another 1 percent after lower than expected volume growth in Q2 on Friday.

Software services exporter TCS was down 0.5 percent whereas its rival Wipro surged 2.56 percent.

Share of Coal India and Sterlite Industries were down 1 percent and 2.3 percent, respectively.

Index heavyweight Reliance Industries played a supportive role today, rising 1.5 percent on Cabinet reshuffle.

Cigarette major ITC was up 0.8 percent and telecom operator Bharti Airtel moved up 1 percent.

In the second line shares, public sector lender Bank of India lost 2.5 percent as higher provisions against bad loans dragged the net profit down by 39 percent YoY to Rs 301 crore in Q2FY13.

Havells India crashed 5.6 percent as its bottomline came in in-line with estimates but earnings before interest & tax margin of electrical consumer durables and switchgears business fell 425 basis points and 305 bps YoY, respectively.

Geometric plunged 10.5 percent following decline in margins and profit sequentially in Q2FY13. Even the company lost USD 3.6 million order in the quarter.

United Spirits tumbled 9 percent after liquor baron Vijay Mallya said he would not sell priced assets to save Kingfisher Airlines. UB Holdings lost 9.5 percent while United Breweries gained 6.5 percent and Kingfisher rose 3 percent.

Mahindra Satyam gained 3 percent ahead of quarterly earnings tomorrow.

The BSE Midcap and Smallcap indices went down 0.4-0.6 percent as declining shares outnumbered advancing by a ratio of 1,581 to 1,208 on the Bombay Stock Exchange.

On the global front, European markets were down 0.6-1 percent due to the hurricane emergency in the US (at the time of closing of Indian equities). The US equity markets will be shut today.