Sensex drops 200 points, Nifty breaks 8,650; HDFC, ITC drag

The S&P BSE Sensex was down 203 points at 27,980 and the Nifty50 was down 67 points at 8,644

Benchmark indices extended losses after Raghuram Rajan at his last monetary policy review meeting as RBI governor hinted upside risks to inflation while keeping key policy rates unchanged, in line with economists' expectations.

At 13:10 PM, the S&P BSE Sensex was down 203 points at 27,980 and the Nifty50 was down 67 points at 8,644. Broader markets are underperforming the benchmark indices- BSE Midcap and Smallcap indices are down almost 1%.

Jimeet Modi, CEO, SAMCO Securities says, “RBI kept key rates unchanged as expected, leaving the decision upon the new incumbent, who is to be announced any time soon. RBI’s survey point to economy accelerating principally due to two factors, one government spending is really occurring at the ground level and second the release of Pay Commission funds into the economy is kick starting the consumption investment cycle which is the foundation for next level of sustainable growth for the economy. Post monsoon the energized rural economy may contribute to inflationary expectation but that is still far away to deduce any conclusion currently as to what to would be policy stance of the new Monetary Committees at that time. The going is great for the economy and for the markets too.”

The rupee today fell by 7 paise against the US currency to close at 66.84 on fresh dollar demand from banks and importers on the back of strong dollar in overseas markets.

In overseas stock markets, most Asian shares rose as US crude oil traded near its highest price in two weeks. US stocks closed lower yesterday after touching record highs as Wall Street caught its breath in the wake of last week's upbeat jobs data.

Back home, HDFC, Bharti Airtel, Adani Ports, ITC and M&M slipped between 1%-2%. Rate-sensitive sectors like realty, banks and auto are leading the downslide. HDFC, M&M, Maruti Suzuki, HDFC Bank and Bajaj Auto are down between 0.3%-2%.

Faced with an uptick in inflation, Raghuram Rajan on Tuesday left interest rates unchanged at his final policy review meeting as RBI governor. Rajan left the repurchase, or repo, rate unchanged at 6.5% as retail inflation for the month of June  headed to 5.77%, driven in large part by a spike in food inflation which has the most weightage in the basket of goods used in the Consumer Price Index (CPI). The Cash Reserve Ration (CRR) was also left unchanged at 4%.

Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services adds, “As expected  RBI maintained its status quo on the policy rate with an accommodating standpoint.  Despite increase in CPI trajectory, RBI maintained the target at 5% for March 2017, but with an increasing risk from 7th pay commission and global uncertainties. Due to which today we are seeing some correction in interest rate sensitive stocks. The governor highlighted a concern that in spite of improvement in liquidity and reduction in cost of funds, the customers have been largely refrained from this benefit. On a positive note RBI has provisioned the forthcoming FCNR redemption, which will provide stability in the currency market.”

Adani Port is trading lower by over 1% ahead of the Q1 numbers. Index heavyweight and cigarette major ITC has dropped 1% to Rs 247. The stock hit a high of Rs 252.40 and low of Rs 246.50 so far during the day.

Among other shares, Inox Wind has fallen to its 52-week low of Rs 200 on the NSE after the rating agency CRISIL on Monday, has revised its outlook on the long-term bank facilities of the company to 'Negative' from 'Stable' and reaffirmed the 'CRISIL AA-' rating.

Sutlej Textiles and Industries extended gains for the third straight session rising 8% to Rs 780 on the BSE after reporting 43% year-on-year (YoY) growth in net profit at Rs 45.09 crore for the quarter ended June 30, 2016 (Q1FY17). The textiles company had a profit of Rs 31.55 crore in the same quarter last year.