3 reasons why Sensex slipped over 600 points today

Despite the cut in repo rate by the Reserve Bank of India (RBI) in its second bi-monthly Monetary Policy review on Tuesday, the S&P BSE Sensex lost 2.2%, or 600 points in intra-day deals. The CNX Nifty, too, lost 2.2%, or 183 points to 8,249 levels.
 
Among the top losers were the Interest rate sensitive stocks – banks, autos and realty. On the National Stock Exchange (NSE), the Bank Nifty and CNX Auto indices lost nearly 3% and 2.1% respectively till 2:45pm.

CNX Realty index also cracked 3.2%. The worst hit, however, was the CNX PSU Bank index that slipped around 4%.

 
“Markets fell for the day despite a 25bps rate cut by the RBI. This was on the expectations of an extended pause by the RBI going ahead and the forecast of a weaker monsoon as compared to the IMD’s May forecast. Monsoon is now expected at 88% of long period average (LPA). Apart from monsoons, the recent rise in oil prices and developments in Greece will remain the focus areas and may impact sentiments in the short term," said Dipen Shah, Head- Private Client Group Research, Kotak Securities in a note.

"Over the medium term, markets will look out for Government’s efforts on kick-starting stalled infrastructure projects and new project awards. Passage of the Constitutional Amendment Bill for GST as well as further progress on Land Acquisition Bill would also be key triggers for the markets over this period," he added.
 
Here are three reasons why the Sensex slipped over 600 points today despite the RBI cutting rates in line with expectations:
 

RBI likely to be on prolonged pause: Markets seem to be taking a cue on future rate cuts from the tone of the policy, which suggests that the RBI will prefer to wait for data on monsoon forecast and keep a check inflation before cutting rates further.

 
Ajay Bodke, head of investment strategy and advisory, Prabhudas Lilladher, for instance, believes that tough the rate cut is on expected lines, the commentary on inflation is a bit hawkish, which is giving an impression to investors that the RBI may remain on a prolonged pause as regards cutting rates further.

 
Concerns over monsoon: Analysts suggest that the road ahead for the markets will depend on the progress of monsoons, which according to latest estimates, has been trimmed to 88% of the long-term average by the government on Tuesday.

 
According to Bodke, a lot will depend on monsoon and how it progresses over the next few months. A pick up in monsoon, which in turn could keep inflation under check, will help in perking up market sentiment. He sees the upside for the Nifty capped at 8,500 – 8,600 levels.

 
Lack of catalysts / positive triggers: With the RBI policy now over, analysts say that the focus now shifts to global events such as interest rate decision by the US Federal Reserve, developments across the euro-zone, especially Greece and how the oil prices pan out going ahead. Analysts say that there are no catalysts / positive triggers for now that can take markets higher.

 
Explains Andrew Holland, CEO, Ambit Investment Advisors: “There is nothing much for the markets to be excited about going ahead and I expect the markets to go down from here on. The markets are in a bit of a twilight zone and there are no catalysts for any sector to move up. We’ll have to wait till the economy starts to recover. Global factors like Greece, interest rate decision by the US Federal Reserve (US Fed) could also weigh on the sentiment,” he adds.