Markets retreat from four-month highs ahead of RBI policy

The benchmark indices retreated on Tuesday from four-month highs hit in the previous session as investors stayed on the sidelines ahead of the Reserve Bank of India's policy decision due tomorrow. Weakness in other Asian markets also spoiled sentiment.

The S&P BSE Sensex settled the day at 28,335, down 104 points, while the broader Nifty50 was ended at 8,768, down 33 points. 

In the broader market, the BSE Mid-Cap and the BSE Small-Cap indices outperformed the frontline indices. Midcap closed 0.2% lower, while Smallcap ended little changed.

The market breadth indicating the overall health of the market turned negative. On BSE, 1,548 shares declined and 1,341 shares rose. A total of 117 shares were unchanged.

"Market has fallen today as consensus of 25bps rate cut is largely factored in. Investors are stepping back due to the uncertainty over FOMC rate hike, US policies and rising crude price, which could impact inflation and rupee movement, casting a shadow over the future RBI decision," said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services.

RBI policy

Analysts expect the RBI to cut the repo rate by 25 basis points on Wednesday after December inflation hit a two-year low. But they warn it will be a close call since the central bank may even opt to maintain status quo until its next review in April.

RBI may keep rates unchanged as it continues to assess the impact of the crackdown on high-value notes on inflation, some analysts said.

Sectors and stocks

BSE Metal was the top sectoral loser and fell 1%, led by slump in Coal India (down 2.3%), Hindalco (down 2%) and Hindustan Zinc (down 1.6%). BSE Energy (down 0.9%), BSE Auto (down 0.8%) and BSE Oil & Gas (down 0.7%) were the other sectoral losers. 

Among gainers, Punjab National Bank rallied 4% to Rs 156 after the company reported an over four-fold jump in net profit to Rs 207.18 crore for the quarter ended December 31, 2016-17, on account of lower provisioning. The scrip settled the day 1.7% higher at Rs 152.

ITC rallied as much as 5.6% to hit its 52-week high after the Specified Undertaking of the Unit Trust of India (SUUTI) sold 2% stake in the company via block deals. It closed flat at Rs 276.

Future Retails ended at its upper circuit of 20% to Rs 227, also its record high on the BSE, after the company reported a strong 87% year on year growth in its standalone net profit at Rs 101 crore for the quarter ended December 2016 (Q3FY17). 

Global markets

European markets were trading flat. The pan-European Stoxx 600 was 0.11% higher, while FTSE and Dax added 0.6% and 0.4%, respectively. 

MSCI's broadest index of Asia-Pacific shares outside Japan was fractionally lower, while Japan's Nikkei closed down 0.35%.

Chinese shares dropped 0.4% ahead of data expected to show that foreign exchange reserves fell for the seventh straight month by about $10.5 billion to $3 trillion in January.

(With inputs from Reuters)