Following RBI's 25 bps cut, Sensex slumps over 500 points

Financials were the top losers post the RBI rate cut along with metal shares

Benchmark indices are trading near day’s low weighed down by rate-sensitive shares after the central bank at its monetary policy review reduced the policy rate by 25 basis points to 6.5%.

At 15:10 pm, the S&P BSE Sensex was down 524 points at 24,876 and the Nifty50 was down 155 points at 7,603, after hitting an intra-day low of 7,596 mark.

"The announcement of the Rs.15,000 cr OMO is a welcome thing. But from the market’s perspective, the liquidity positives would play out over a longer term. We feel the measures taken would tantamount to more than a 25 bps repo rate cut. But this would take time to sink into the markets. This leaves little to celebrate in the immediate term, therefore the markets would offer a tepid reception the policy. But we feel the measures would allow better transmission and so it would reflect in the markets over time, " Arun Gopalan, Vice President Research at Systematix Shares & Stocks.

Top losers from the Sensex pack are Adani Ports, ICICI Bank, Bharti Airtel, SBI and Coal India, all slumping between 2%-5%.

Interest rate-sensitive sectors shares such as bank, auto and realty were down more than 1% each on profit booking after the Reserve Bank of India (RBI) today reduced the repo rate or repurchase rate, the rate at which banks borrow from the central bank, by 25 basis points.

Coal India has dipped nearly 3% to Rs 277, its lowest level since April 7, 2014 on National Stock Exchange (NSE). In past month, the stock has fallen nearly 15% after the company said that the coal stock in some of its mines has increased due to regulated lifting by the power producers.

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Updated at 12:30 pm

Benchmark shares indices have extended losses and have plunged over 1% after the Reserve Bank of India at its monetary policy review reduced the policy rate by 25 basis points to 6.5% which was lower than street expectations of 50bps.

At 12:15 pm, the S&P BSE Sensex was down 333 points at 25,067 and the Nifty50 was down 99 points at 7,660.

In the broader market, the BSE Midcap and Smallcap indices were down 0.4% each. Market breadth was weak with 1194 losers and 787 gainers on the BSE.

The RBI also left the cash reserve ratio unchanged at 4%. However, the RBI The reverse repo has been changed to 6%, narrowing the spread between the repo and reverse repo by 50 bps.

With this the central bank has reduced policy rates by 150 basis points since the start of the accomodative cycle, RBI Governor said in a press conference. The central bank expects Consumer Price Inflation to ease to around 5% and economic growth of 7.6% in the current fiscal ending March 31, 2017.

"The RBI has cut the repo rate by 25 basis points, as per our and consensus expectations. RBI is comfortable with its projections of inflation trending towards 5% by March 2017 and has also maintained GDP growth projections of 7.6% by March. RBI has also commented positively on the direction that has been set in the Budget and other Government actions. We expect another 25 to 50 basis point rates during the current financial year, more likely in the second half," adds Mihir Vora- Director and Chief Investment Officer, Max Life Insurance.

The rupee gained strength after the RBI announced reduction in key policy rate by 25bps. The rupee was trading higher by 10 paise at 66.10 to the US dollar compared to the previous close.

SECTORS & STOCKS

Rate sensitive sectoral indices such as Bankex, Auto and Capital Goods were among the top losers down nearly 1% each along with the Metal index. Consumer Durables index was the sole gainer.

Financials were among the top losers with ICICI Bank, SBI, HDFC Bank, Axis Bank and HDFC were down 0.2%-2.5% each.

ITC extended losses and was down over 1% after the FMCG major shut down its cigarette factories on account of uncertainty over health warnings on cigarette packs.

Tata Motors and Infosys were down over 1% each on profit taking after gains in the previous session.

Other losers include, Reliance Industries, Bharti Airtel, Infosys and L&T among others.

Metal shares were among the top losers with Hindalco and Tata Steel down over 1.3% each.

Consumer Durables shares such as Rajesh Exports, Bajaj Electricals gained on hopes that lower interest rates would result in higher sales.