Rupee slips to 62.19/dollar ahead of RBI policy, Sensex choppy.

The BSE Sensex traded flat, while the Indian rupee declined against the dollar ahead of the Reserve Bank of India's mid-quarter review of the monetary policy for 2013-14. New governor Raghuram Rajan is expected to hold key rates and ease liquidity tightening measures in his maiden policy.

As of 09.30 a.m., the BSE Sensex traded flat, after earlier falling around 100 points in opening trade. The broader Nifty, which slipped below the key 6,100 levels, was down marginally.

The rupee, however, traded sharply lower at 62.11 per dollar as against Thursday's close of 61.77. The partially convertible rupee fell 0.6 per cent to a low of 62.19 earlier.

Analysts advised caution ahead of the policy announcement. Sarvendra Srivastava said 5,960-6,000 levels are strong support for the Nifty.

Some profit taking is also expected after the monster rally on Thursday, which was triggered after the US Federal Reserve decided against tapering its economic stimulus in a surprise move.

Banking stocks corrected amid concerns that the central bank may not roll back all the emergency measures, announced in July to defend the rupee that led to pressure on banks' margins.

Dr Rajan is widely expected to leave the marginal standing facility (MSF) unchanged, a Reuters poll showed. The overnight rate is generally viewed as the central bank's effective policy rate now, since it is the major interest rate tool being used to support the rupee.

The central bank jacked it up by 200 basis points in July to 10.25 per cent so that it stood 300 basis points above the official policy repo rate, aiming to tighten market liquidity and make it more expensive to speculate against the rupee.

Still, A. Prasanna, economist at ICICI Securities Primary Dealership Ltd in Mumbai, said it was a 50/50 call as to whether Rajan cuts the MSF to 9.25 per cent.

Several economists expect Dr Rajan to reverse some of the other rupee-supporting steps. He might relax a requirement that banks meet 99 percent of their cash reserve ratio on a daily basis. The minimum was increased from 70 per cent previously, which drained liquidity from money markets but also choked off credit.

ICICI Bank fell 1 per cent, while HDFC Bank traded 0.2 per cent lower. Other rate sensitive socks - realty and auto - will also be in focus.

Drug maker Ranbaxy fell as much as 6 per cent after reports that its  US-based facility, Ohm Laboratories, is under surveillance of the US Food and Drug Administration (FDA).

Source : profit.ndtv.com