The Indian equity market extended losses to third consecutive trading session on Tuesday. Indices witnessed a sharp sell-off after the Reserve Bank of India in its sixth bi-monthly monetary policy decided to keep key interest rates unchanged. Although the decision was well in line with market expectation, rate sensitives like banking, realty and auto stocks saw heavy offloading. On the other, a pull-back in Crude Oil prices saw select energy shares bounce back sharply in trade today.
Amar Ambani, Head of Research IIFL said, "No rate cut was in line with expectation. In the absence of any incremental compelling data since the previous 25bps cut on Jan 15, 2015, RBI chose to retain the repo at 7.75%. SLR was lowered by 50bps taking it to 21.5% in an attempt to create space for commercial banks to expand credit. Banks are yet to pass through the benefits of Jan 15 repo rate cut and a decline in funding cost in the wholesale market due to their reluctance around effecting meaningful rate reduction on retail TDs.
RBI reiterated that the pace of further easing would be dependent on continuance of disinflationary trends, government’s performance on fiscal consolidation and policy reforms targeted at easing supply constraints in the economy. While the January and February inflation data is likely to be supportive, the Budget would be a critical input in central bank’s decision with regards to further easing in the next policy on April 7, 2015. With the Budget widely expected to adhere to fiscal consolidation and government moving on reforms towards debottlenecking economic activity, we expect RBI to cut the repo rate by 25bps in April policy and by additional 50bps in the remainder of the calendar year." Mr Ambani added.
The market took a sharp dip in late morning trade and tumbled to a low of 28,900 - down 353 points in intra-day trade led by a huge sell-off in banking stocks as the Reserve Bank of India (RBI) maintained status quo on rates.
The RBI today left the key repo, reverse repo rates and the CRR (Cash Reserve Ratio) unchanged. The Central Bank, however, cut the SLR (Statutory Liquidity Ratio) by 50 basis points to 21.5 per cent.
Speaking at the post-policy conference, the Central Bank said that it would wait for more data and would need time to understand the new GDP numbers before taking action on the rates.
The Sensex almost wiped-out all the losses in mid-noon deals led by strong buying in select heavyweights like - Reliance Industries, ITC and TCS, but once again drifted lower towards the end as banking shares got pounded in late deals.
The BSE benchmark index, the Sensex, finally ended with a loss of 122 points at 29,000. In the process, the index has now shed 2.3 per cent (682 points) in the last three trading sessions.
The NSE Nifty swung in a range of 111 points; the index from a high of 8,837 plunged to a low of 8,727, and eventually ended 41 points (0.5 per cent) lower at 8,757.
The India VIX (Volatility) index declined nearly 3 per cent to 19.815.
In the broader market, the CNX Midcap index declined 0.8 per cent to 13,102, and the Smallcap index was flat at 5,545.
The breadth too was negative - out of 1,691 stocks traded on the NSE, 809 declined and 672 advanced today.
Among sectors, the Bank Nifty slumped 2.4 per cent to 19,383. The Realty index slipped over a per cent to 235.35, and the Auto index declined 0.6 per cent to 8,922. The Energy index soared 1.7 per cent to 9,040, and the FMCG index added a per cent to 21,051.
The financials were the major draggers on the BSE index - HDFC, Axis Bank, HDFC Bank, ICICI Bank and SBI collectively accounted for a loss of 263 points on the BSE index.
Punjab National Bank was one of the biggest percentage losers in the banking space, after the company reported over 100 per cent rise in net NPAs. The stock plunged over 8 per cent to Rs. 176.
Bank of India, Canara Bank, Kotak Bank, Allahabad Bank, Indian Overseas Bank, IDBI and Yes Bank also plunged 4-5 per cent each.
Among other Nifty stocks - Tata Power tanked over 4 per cent to Rs. 87.40. Bajaj Auto and Mahindra & Mahindra slipped around 3.5 per cent each at Rs. 2,260 and Rs. 1,199, respectively.
BPCL declined over 3 per cent to Rs. 725. Cipla, DLF, Ambuja Cement, Jindal Steel, Maruti, Dr.Reddy's and IDFC were the other prominent laggards.
On the other hand, Reliance Industries, ITC and TCS contributed 111 points to the BSE index. Reliance rallied over 3 per cent to Rs. 936 after the company announced tie-up with SBI to apply for payment banking license.
Sesa Sterlite was the major gainer in the Nifty space. The stock soared nearly 6 per cent to Rs. 210.
Cairn India and ONGC also surged 4 per cent and 3 per cent each to Rs. 245 and Rs. 359, respectively, as the Brent Crude Oil prices shot back above $ 56-level.
Bharti Airtel too zoomed over 4 per cent to Rs. 374. Grasim, Sun Pharma, TCS, ITC, BHEL, NTPC, Tata Motors and Gail India were up 1-2 per cent each.
Around 91 stocks registered a fresh 52-week high today. Prominent among these were - Apollo Tyres, Aurobindo Pharma, Axis Bank, Bharat Electronics, BEML, Bharat Forge, Dabur, HCL Technologies, IndusInd Bank, Ranbaxy, Siemens, Sun Pharma, Tata Chemicals, Tata Elxsi, Tata Motors, Titan, UPL and Wipro.
