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April 2012

The Indian equity markets represented by S&P CNX Nifty posted negative 1.7% returns in the month of March, breaking its upward trend for the year due to lacklustre budget and concerns over General Anti Avoidance Rule (GAAR) introduced in the budget. The global indices posted mixed returns.

While FII inflows were healthy in the first half, they slowed down in the second half of the month as the government introduced the GAAR, which may bring FIIs under the purview of taxation. The net FII inflows stood at Rs 652 bn.  Crude continued to be at the high levels of US$ 123-125 per barrel. Rupee depreciated by ~3.8% vs. the US dollar.

After falling for five consecutive months, WPI-based inflation rose to 7% in February 2012, from 6.6% in January driven mainly by higher inflation in primary food articles. On March 9, 2012, the RBI announced a steep 75 bps cut in the CRR, bringing it to 4.75 per cent, in order to alleviate the tight liquidity conditions. This move is expected to have infused Rs 480 bn in the system. However, in the monetary policy review on 15th March, the Central Bank refrained from announcing any policy rate cut as inflation remained above RBI’s comfort level of 5%. 

The Union Budget FY2012-13 announced on 16th March was neither populist nor reformist and adopted a middle path. It raised the indirect taxes rates and gave marginal relief to individual tax payers.


In line with the benchmark index, most sectoral indices declined in March. Interest rate sensitive sector realty declined the highest by 9.1%, as RBI stayed away from rate cuts. Power index and Oil & gas index declined by 8.3% and 7.2% respectively. The FMCG index was the highest gainer with 7.8% returns followed by healthcare which posted 4.6% returns.