Upcoming policy review subdues markets; Sensex down 84 points

With investor sentiments turning bearish a day ahead of the fourth bi-monthly monetary policy review of the central bank, a barometer index of Indian equities shed 84 points or 0.33 percent during the late afternoon session on Monday.

The markets were dragged down over the uncertainty on the Reserve Bank of India's (RBI) rate cut decision. The RBI will conduct its fourth bi-monthly monetary policy review on September 29.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE) had closed on Thursday (Sep 24) with a bare gain of only 39 points or 0.15 percent. On Friday, the Indian markets remained closed on account of Eid-ul-Zuha.

The Indian equity markets opened on a lower note on Monday, following a sharp downward revision of Chinese industrial profits.

Japan's Nikkei index fell by 1.32 percent. China's Shanghai Composite Index dropped down by 0.51 percent. However, Hong Kong's Hang Seng inched up by 0.43 percent

Notwithstanding the initial downside corrections, the Indian equity markets pared their initial losses due to clarification on minimum alternative tax (MAT), as well as Silicon Valley's positive response to Prime Minister Narendra Modi's pitch on "Digital India".

On Monday, the wider 50-scrip Nifty of the National Stock Exchange (NSE) traded flat. It shed by 14.55 points or 0.18 percent at 7,853.95 points.

The S&P BSE Sensex, which opened at 25,922.71 points, was trading at 25,779.31 points (at 2.15 p.m.) -- 84.19 points or 0.33 percent down from the previous day's close at 25,863.50 points.

The Sensex touched a high of 25,936.89 points and a low of 25,738.54 points in the intra-day trade so far.

Observers pointed out that negative Asian market cues coupled with anxiety over the upcoming monetary policy review subdued Indian markets.

"Chinese data showing that industrial profits declined steeply did give a negative opening to Indian markets, but the Chinese story drew no surprises," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

"With crucial RBI rate decision to be announced tomorrow (Tuesday), markets looked visibly cautious through the first half of the day...."

Nitasha Shankar, vice president of research with YES Securities said: "Market participants prefer to maintain light trading positions in the run up to the RBI policy meet."

"However, banking stocks have witnessed some buying momentum, pulling the index higher; as expectations of a rate cut builds up. On the other hand, metal and auto stocks are dragging the index lower."

Sector-wise, automobile, metal, capital goods, information technology (IT) and technology, entertainment and media (TECK) came under heavy selling pressure.

However, consumer durables, healthcare and banking sectors supported the markets.

The S&P BSE automobile index plunged by 122.76 points, metal receded by 115.47 points, IT index declined by 98.02 points, capital goods index was lower by 95.42 points, and TECK index fell by 73.43 points.

However, the S&P BSE consumer durables index augmented by 208.50 points, healthcare index gained 138.55 points and banking index was higher by 89.68 points.