Markets continue free-fall as RBI keeps rate unchanged; post 5th weekly loss

Equity markets racked up heavy losses for the third straight session Friday after the RBI unexpectedly maintained status quo on rates but changed its stance to "calibrated tightening" amid the rupee breaching the 74-mark.

The BSE Sensex plunged 792.17 points to end at a near six-month low of 34,376.99, while the broader NSE Nifty dropped 282.80 points to 10,316.45.

This was the fifth straight weekly loss for the benchmarks. The Sensex declined by a massive 1,850.15 points or 5.10 per cent, and the Nifty lost 614 points or 5.50 per cent, this week.

The Reserve Bank Friday unexpectedly maintained status quo on the benchmark interest rate but warned that rising oil prices and tightening of global financial conditions pose substantial risks to growth and inflation.

The central bank changed its policy stance to 'calibrated tightening' from 'neutral', while affirming its commitment to achieve the medium-term objectives to contain price rise.

Marketmen were expecting the six-member Monetary Policy Committee to go for at least a 0.25 per cent hike at the review.

Meanwhile, the rupee crashed below the 74-level against the US dollar for the first time ever.

The domestic currency was quoting 65 paise lower at 74.23 (intra-day) against the dollar soon after the RBI announced its monetary policy.

The 30-share index remained in the negative zone through the session. Selling activity gathered momentum after the RBI's policy decision, which dragged the index to a low of 34,202.22. It finally finished 792.17 points, or 2.25 per cent down at 34,376.99.

This is its lowest closing since April 23, when it had finished at 34,450.77 points.

The NSE Nifty too tanked 282.80 points, or 2.67 per cent to close at 10,316.45 points. Intra-day, it hit a low of 10,261.90 soon after RBI's policy announcement.

"Status quo policy was quite surprising while under shooting inflation and recent fuel tax cut may give some leeway to the cautious sentiment.

"However, rupee weakened further and market dived to lower lows as risk of fiscal deficit and rise in US bond yield still impacting the outflow of foreign money," said Vinod Nair, Head of Research, Geojit Financial Services.

Meanwhile, foreign portfolio investors (FPIs) sold shares worth Rs 2,760.63 crore Thursday, while domestic institutional investors (DIIs) bought equities to the tune of Rs 1,823.59 crore, as per provisional data.

ONGC was the top loser in the Sensex pack, tumbling 15.93 per cent, followed by RIL 6.31 per cent.

Other major losers were Adani Ports 5.36 per cent, SBI 4.73 per cent, Bharti Airtel 4.27 per cent, Maruti Suzuki 4.18 per cent, Yes Bank 4.16 per cent, Bajaj Auto 3.97 per cent, ITC Ltd 3.52 per cent, Vedanta Ltd 3.42 per cent, M&M 3.35 per cent, HDFC 3.24 per cent and Axis Bank 3.01 per cent.

Bucking the trend, Infosys emerged as the top gainer by spurting 2.19 per cent, while TCS rose 1.88 per cent.

Shares of oil marketing companies bore the brunt and tumbled as much as 25.18 per cent after the government Thursday cut excise duty on petrol and diesel by Rs 1.50 per litre and asked oil firms to absorb Re 1 a litre of prices.

Shares of HPCL crashed 25.18 per cent, while BPCL tumbled 21.11 per cent and IOC 16.99 per cent.

Sector-wise, the BSE oil & gas index lost a massive 12.68 per cent, followed by PSU 7.06 per cent, infrastructure 5.76 per cent, metal 3.45 per cent, auto 3.16 per cent, realty 2.70 per cent, FMCG 2.33 per cent, capital goods 2.26 per cent, power 2.18 per cent and bankex 1.93 per cent.

However, IT index jumped 1.11 per cent, teck 0.70 per cent and consumer durables 0.62 per cent.

The broader markets showed a similar trend, with the BSE mid-cap index falling 2.39 per cent and small-cap gauge losing 1.82 per cent.

Asian stocks edged lower, following overnight losses in Wall Street.

Japan's Nikkei fell 0.80 per cent, Singapore shed 0.66 per cent, Hong Kong's Hang Seng slipped 0.15 per cent and Taiwan Index lost 1.88 per cent.

In Europe, Frankfurt's DAX fell 0.70 per cent and France's Paris CAC was down 0.32 per cent in early deals. London's FTSE too fell 0.53 per cent.