Markets finish on a dismal note; Sensex drops nearly 700 points

Markets ended the session on a dismal note after the RBI lowered its FY16 GDP growth estimate amid sub normal monsoons concerns and crude price hike. Caution prevailed on the bourses on uncertainty regarding further policy easing.

Provisionally, the Sensex closed 683 points lower at 27,166 levels and the Nifty plunged 201 points to end at 8,232 mark.

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(updated at 2.35 PM)

Benchmark indices continue to reel under selling pressure weighed down by rate-sensitive sectors like financials, real-estate and auto after the RBI at its monetary policy review signaled that further rate cuts could be delayed.

Further, this year's monsoon forecast has been downgraded to 88% of the long-term average, Earth Sciences Minister Harsh Vardhan said on Tuesday, raising fears of a drought.

The Reserve Bank of India today reduced the benchmark repo rate, or the rate at which banks borrow from the central bank, by 25 basis points to 7.25% which was in-line with expectations. Meanwhile, it has kept both CRR and SLR rates unchanged.

At 14:35PM, the 30-share Sensex was down 632 points at 27,217 and the 50-share Nifty was down 188 points at 8,245.

According to Bekxy Kuriakose,head – Fixed Income, Principal Mutual Funds, “RBI cut key rates by 25 bps as expected.  RBI continues to maintain a cautious tone on its stance going forward given the uncertainty on monsoon and future trajectory of food prices. In terms of growth projections, it’s interesting to see that RBI has focused on GVA at basic prices rather than real GDP at market prices probably because of distortion in the latter due to subsidies and indirect taxes.”

“Gilt prices have fallen post policy probably due to heavy positions and traders’ view of no further rate cuts given RBI policy tone. We feel yields are attractive to stay invested and would recommend investors who are underinvested in duration to use this correction as an entry point. Money market rates are expected to remain range bound going forward and we expect banking system liquidity deficit to ease from May levels”, she adds.

Among broader markets, BSE Midcap and Smallcap indices are down over 1%. The market breadth is negative. Out of 2,595 stocks traded on the BSE, there were 745 advancing stocks as against 1,745 declines.

SECTORS & STOCKS

Rate-sensitive shares are bleeding in trades today after the Reserve Bank of India at its monetary policy review today signalled that it would await data on monsoon forecast and keep a check inflation before any further rate cuts. The central bank also highlighted uptick in global crude oil prices amid geopolitical concerns.

Bank shares are trading lower amid concerns of sluggish credit growth while asset quality concerns continue to weigh on the sector. The BSE Bankex and Bank Nifty have slipped around 3%. HDFC Bank, SBI, ICICI Bank and Axis Bank are down 1-5%.

BSE Realty index has plunged around 3%. Prestige Estates, Indiabulls Real Estate, Godrej Properties, Unitech and DLF have slipped between 3-8%.

Auto shares which had gained post May sales data also witnessing profit taking at higher levels. The BSE Auto index is down 1.5%. Hero MotoCorp is down 3%, Tata Motors has dipped 0.9% while Bajaj Auto and Maruti Suzuki were trading with marginal losses.

Among other losers, ITC has dropped over 3% after reports suggested that Maharashtra has banned sale of loose cigarettes.

Hero Moto, Hindalco, Cipla, HUL and Wipro are other notable losers, down almost 3%.