Market: Weakness continues as rate cut expectations fade

Key benchmark indices extended losses and hit fresh intraday low in noon deals only to recover slightly from day's lows. Market sentiment was particularly hit after the Reserve Bank of India (RBI) governor Raghuram Rajan yesterday commented that high inflation, "a destructive disease", is forcing the central bank to keep interest rates high.

Speculation is rife that the central bank will maintain its status quo on key policy rates in its monetary policy review on Monday. Inflation targeting as proposed by Urijit committee, based on retail inflation (CPI-indexed inflation) to bring it down to 8 percent over the next 10-months and to 6 percent in further 24-months, implies elevated policy rates for the rest of the year, experts believe.  

Downfall in Asian stocks and overnight losses for US stocks also hit sentiment on the domestic bourses adversely.

The 30-share BSE Sensex, was down 184.70 points or 0.86%, trading at 21,192.35 while the 50-unit NSE Nifty was trading almost 1% lower at 6,284.45.

Broader markets too came under selling pressure with BSE Small-Cap and Mid-Cap indices off over than 1% each.

Rate sensitives stocks are under pressure currently with frontline banks and auto counters leading the downturn on the indices.

Metal stocks extended Thursday's losses triggered by data showing that a private gauge of China's manufacturing in January unexpectedly contracted this month.

The rupee is at a two-week low tracking weak regional equities. The pair is at 62.08 versus Thursday's close of 61.92 and intraday high of 62.19, the highest since January 9.

Asian shares continued to trade weak, extending the previous day's losses as weak Chinese manufacturing data raised concerns over the economy. Shares in Japan also witnessed selling pressure tracking weak data from China and the yen appreciated against the US dollar.
Interestingly, China's Shanghai Composite was the only gainer in the region up 0.8%. The Nikkei slumped 2.5% while Hang Seng and Straits Times were down over 0.8% each.

The BSE Realty Index was the top loser among the sectoral indices on the BSE, down 2.1% followed by Capital Goods, Bankex, Auto, Power and Metal indices.

Except for TCS and Wipro all the other 28 stocks on the BSE were in the red.

Financials were among the top losers with ICICI Bank, HDFC Bank, HDFC and SBI were down 0.8-2% each.

FMCG shares also witnessed profit taking with both Hindustan Unilever and ITC down over 1.5% each.

Among capital goods shares, L&T was down 2% on profit taking after recent gains post its third quarter earnings. BHEL was down 3%.

In the auto sector, Tata Motors, M&M, Maruti Suzuki, Hero MotoCorp and Bajaj Auto were down 1-2.6% each.

Meanwhile, Ranbaxy shares continued to remain under selling pressure and was down nearly 18% at Rs 344 after the US Food and Drug Administration (FDA) barred import of Active Pharmaceutical Ingredients or API, manufactured at the company’s Toansa facility in Punjab. The regulator also extended the ongoing consent decree with Ranbaxy’s three formulation facility in India to include Toansa unit.

In the broader market, the BSE Mid-cap index and BSE Small-cap indices were down over 1% each.

Market breadth was weak with 1466 losers and 676 gainers on the BSE.

The market breadth, indicating the overall health of the market, was weak. All the thirteen sectoral indices on BSE were in the red.