Global cues outweigh rate cut impact as Sensex sinks over 2%; Rs loses 2-week gain, down 25 paise

The 30-share index, which had gained 130.01 points in the previous session, was trading 125.40 points or 0.49 per cent lower at 25,274.25 with realty, auto, metal, banking, teck and IT stocks leading the fall.

By: ENS Economic Bureau | Mumbai | Updated: April 6, 2016 1:40 am
BSE sensex Brokers said besides a weak trend at other Asian bourses following overnight losses in the US markets, offloading of positions by participants ahead of RBI’s first bi-monthly monetary policy for 2016-17 to be announced later in the day, influenced the sentiment.

Even as the Reserve Bank of India announced a 25 basis point cut in the repo rate (at which RBI lends to commercial banks) and looked to address liquidity concerns, the equity markets were not enthused. The benchmark indices lost over 2 per cent on Tuesday, their biggest intraday fall in 8 weeks as they came under pressure from the global markets following a decline in crude oil prices.

The benchmark Sensex at the Bombay Stock Exchange fell 2 per cent or 516 points on Tuesday to close below 25,000 at 24,883.6 and Nifty at the National Stock Exchange fell 2 per cent or 155 points to close at 7,603.

The weakness in India followed decline in Asian and European markets and a sell-off by the foreign institutional investors. As the crude prices declined, Japan’s Nikkei fell 2.4 per cent and the Hang Seng in Hong Kong fell 1.6 per cent. Even in Europe, the premier indices of Germany and France were down by over 2.2 per cent in the afternoon trading hours. Both the dollar and Euro also weakened during the day against the Japanese Yen.

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The FIIs too sold Indian equities worth a net of Rs 800 crore on Tuesday.

The Brent crude prices which had hit a high of over $42 per barrel in mid March, came down to a level of $37.7 per barrel on Tuesday. While there were concerns over oil producers not reaching an agreement to curb oversupply, the fall in prices gained momentum after reports came that gasoline demand in the US declined for the first time in 14-months in the month of January.

In India the biggest losers were rate sensitive stocks and the banking, auto and real estate indices fell sharply during the day. The banking index at BSE fell 3.2 per cent.

Among rate-sensitive stocks, ICICI Bank topped the list by tumbling 5.45 per cent followed by SBI that lost 5.38 per cent. Axis Bank fell 2.89 per cent and the HDFC Bank declined 1.03 per cent during the day. Among the Sensex companies the biggest loser was Adani Port and it fell 6.2 per cent. The sell-off was so intense that barring Lupin, all other 29 stocks that form the Sensex closed in the red. The fall in the markets was widespread and the mid-cap index and small cap index at BSE fell 1.47 and 1.4 per cent respectively.

The markets opened at a weak note on RBI’s rate cut announcement and statement that the policy would remain accommodative going forward, failed to lift investor sentiment. Loans are expected to get cheaper as RBI reduced short-term lending to over five-year low of 6.5 per cent, taking the total cut to 1.5 per cent since January last year.

“It did not help that global markets were in deep red, with US Fed minutes expected tomorrow. Cash market volumes as well as FII buying have also been easing for the past few days, in contrast to a bright March,” said Anand James, chief market strategist at Geojit BNP Paribas.

Meanwhile, snapping its nearly 2-week winning spree against the greenback, the rupee Tuesday dropped by 25 paise to end at 66.46 on fresh demand for the dollar from banks and importers amidst sharp fall in equity. The rupee resumed marginally lower at 66.25 per dollar as against yesterday’s closing level of 66.21 at the Interbank Foreign Exchange (Forex) market and hovered in a wide range of 66.07 and 66.52 before finishing at 66.46, showing a loss of 25 paise or 0.38 per cent.

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