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Benchmark indices have slumped further and are trading at day’s low weighed down by rate sensitive stocks and capital goods majors despite the Reserve Bank of India (RBI) cut repo rates by 25 basis points (bps) to 7.25%.
At 2.10 PM, the 30 share Sensex has shed 482 points, to 27,367 levels while the Nifty 50 slipped below 8,300 to 8,286 levels, down by 148 points.
Top 5 losers on the Sensex include HDFC, ITC, SBI, Hero Motocorp and Axis Bank down over 3% each.
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(updated at 1.25 PM)Markets extended losses in noon trades on Tuesday weighed down by rate-sensitive stocks after the Reserve Bank of India (RBI) at its monetary policy review indicated that the further rate cuts would depend on the monsoon and inflation data.
This year's monsoon forecast has been downgraded to 88% of the long-term average, Earth Sciences Minister Harsh Vardhan said today, raising fears of a drought. IMD in April forecast monsoon rains at 93% of the long-term average.
At 1:25 PM, the 30 share Sensex shed 421 points, to 27,428 levels while the Nifty 50 slipped below 8,300 to 8,298 levels, down by 132 points.
The broader markets are, however, faring marginally better than their larger peers with BSE Midcap and Smallcap indices down by 1% and 0.9% respectively. The market breadth is also negative with 1559 declines against 821 advances on the BSE.
On the currency front, the Indian rupee trimmed its initial gains and was down by 5 paise to 63.75 per dollar compared to the previous close of Rs 63.70 on dollar demand from importers.
RBI POLICY
The central bank in its monetary policy announced a 25 basis point repo rate cut to 7.25%, which was in sync with the street expectations. However, RBI decided to keep the CRR and SLR rates unaltered.
TAKE ON RBI POLICY
“RBI has cut policy rates by 25bps in line with our and consensus expectation, RBI indicated that more easing will be contingent on monsoon performance and governments acts to control inflation in future. RBI has reasoned todays cut to weak investment activity and lower demand impinging on economic outlook,” said Kunal Shah, Fund Manager, Debt at Kotak Mahindra Old Mutual Life Insurance Ltd.
He added, “We believe RBI can ease rate by more 25bps in current fiscal year if monsoon performance is satisfactory without creating spikes in food prices. Passing of land & GST bill will also pave the way for more easing. We interpret from today’s RBI comments that potential growth of the economy is between 8-8.5% giving enough room for easing since current growth is closer to 7%.”
He further said, “If food inflation remains RBI can ease further, bond yields in such case will drop below 7.5%. In near term yields will remain in the narrow range with upward bias and take cues from monsoon performance and international energy prices.”
SECTORS & STOCKS
All the sectors, except for Oil and Gas, are trading in the negative zone. The rate sensitive sectors are the major laggards on Dalal Street.
Out of the 30 stocks on the Sensex, 28 stocks are in red. The financial sector is bleeding after the announcement of RBI’s bi-monthly monetary policy. BSE Bankex and Bank Nifty has slumped over 2% each. Bank Nifty is trading at 18,178, down 438 points.
Among the financials, ICICI Bank, HDFC twins, Axis bank, and SBI have all dropped 1.5-2 % each on the BSE.
From the Auto space, Hero Motocorp is leading the downfall and is the top loser on the BSE. Shares of the two wheeler manufacturer have slashed over 3% on the BSE after the company sold 569,876 vehicles in May as against a total of 602,481 vehicles in the corresponding period last year, depicting a fall of 5.4%.
Bajaj Auto has also dropped 0.5% on the BSE after the company sold 3,45,438 units in the month of May as compared to 3,51,436 units in the same period last year, showing a drop of 2%.
Index heavyweight, ITC has declined over 2.5% on the Sensex after reports suggested that Maharashtra has banned sale of loose cigarettes. Also, the cigarette manufacturer had posted a weak quarter led by an equally weak demand.
On the flip side, Reliance Industries has gained over 1% on the BSE after the company along with Pioneer Natural Resources entered into an agreement with Enterprise Products Partners to sell their stakes in Eagle Ford Shale Midstream for $2.15 billion.
