Market tumbles in a broad-based sell-off

Key benchmark indices dropped sharply amid a broad-based sell-off in index pivotals. The barometer index, the S&P BSE Sensex, lost 792.17 points or 2.25% at 34,376.99. The Nifty 50 index lost 282.80 points or 2.67% at 10,316.45. Today's slide on the bourses was led by index pivotals Reliance Industries, HDFC and ITC. Shares from oil & gas sectors dropped sharply. Sentiment was impacted after the Reserve Bank of India (RBI) changed its stance to calibrated tightening. Negative global stocks also weighed on the sentiment.

The Reserve Bank of India (RBI) unveiled its fourth bi-monthly monetary policy today, 5 October 2018. On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5%. Consequently, the reverse repo rate under the LAF remains at 6.25%, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%.

The decision of the MPC is consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth, RBI said.

Volatility ruled the roost in early trade as the key benchmark indices cut initial losses triggered by negative Asian stocks. The Sensex regained the psychological 35,000 level soon after sliding below that level in early trade. Fresh selling pulled the key benchmark indices lower in morning trade with the Sensex once again sliding below the 35,000 level. Stocks staged mild recovery in mid-morning trade after seeing steep intraday slide. Indices traded lower in early afternoon trade. Weakness persisted on the bourses in afternoon trade. A sell-off gripped bourses in late trade, pulled the key indices to intrday low.

The trading activity on that day showed that the foreign portfolio investors (FPIs) sold shares worth a net Rs 2760.63 crore yesterday, 4 October 2018, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 1823.59 crore yesterday, 4 October 2018, as per provisional data.

The S&P BSE Mid-Cap index lost 2.7%. The S&P BSE Small-Cap index lost 2.02%.

The market breadth, indicating the overall health of the market, was weak. On the BSE, 698 shares rose and 1951 shares fell. A total of 132 shares were unchanged.

Shares of index heavyweight Reliance Industries dropped 6.31% to Rs 1,049.85.

Among other index heavyweights HDFC (down 3.24%) and ITC (down 3.52%) declined.

Oil & gas stocks declined on reports the government has asked the PSU OMCs to absorb Re 1 per litre on sales of petrol and diesel respectively. Among PSU OMCs, HPCL (down 25.18%), BPCL (down 21.11%), and Indian Oil Corporation (down 16.19%) edged lower.

Shares of oil exploration and production (E&P) companies dropped. ONGC (down 15.93%) and Oil India (down 10.57%) edged higher.

Shares of state-run gas transmission and distribution firm GAIL (India) dropped 10.27%.

Overseas, European stock markets declined as rising yields continued to take their toll while investors waited for a US job data report to shed some light on whether higher interest rate will be required to prevent the economy from overheating.

Asian shares dropped after benchmark US Treasury yields surged to a seven-year high and strong economic data fanned concerns about inflation and the risk of faster-than-expected interest rate rises. US stocks dropped yesterday, 4 October 2018 as as US Treasury yields continued their ascent to multi-year highs on the latest round of strong economic data, building concerns for an acceleration of inflation.

Investors will keep a close eye on monthly US payrolls report due later in the global day after the sell-off in bonds that's been in part triggered by data underscoring the strength of the American economy. Investors are looking for signs of wage growth that could accelerate Fed tightening plans in the US government's September jobs report.

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