The benchmark BSE Sensex on Friday plunged by 434 points after the Reserve Bank of India (RBI) slashed the repo rate and the growth outlook for this fiscal amid concerns over the slowdown in the economy.
After opening nearly 300 points higher, the 30-share index gave up all the gains to turn negative shortly after the policy announcement by the RBI.
After swinging 770 points during the day, the Sensex ended 433.56 points or 1.14 per cent lower at 37,673.31. It hit an intra-day low of 37,633.36 and a high of 38,403.54. The broader NSE Nifty plunged 139.25 points or 1.23 per cent to close at 11,174.75.
The central bank reduced its benchmark lending rate by 0.25 percentage point to 5.15 per cent to revive growth that hit a six-year low of 5 per cent in the June quarter. The RBI also lowered its growth forecast for 2019-20 to 6.1 per cent from 6.9 per cent earlier and affirmed commitment to remain accommodative to address growth concerns ‘as long as necessary’.
The index plummeted 1,149 points or 2.96 per cent during the week.
Ajit Mishra, vice president, Research, Religare Broking, said, “markets plunged sharply lower and lost over a per cent citing weak domestic cues. The beginning was upbeat, thanks to firm global markets but anxiety ahead of the RBI policy outcome capped the movement. The sentiment dented as the RBI lowered its growth forecast which triggered a sharp decline across the board.”
“Despite the rate cut and the dovish commentary, equity market has reacted negatively, especially banks. That’s because of the RBI’s focus on quick transmission of lower interest rates would put pressure on margins of banks,” Gaurav Dua, Sr VP, head – Capital Market Strategy & Investments, Sharekhan by BNP Paribas, said. “Also, the economic growth outlook remains concerning despite the 135 bps policy rate cuts in 2019 and there is limited elbow room with RBI now to further take monetary actions to support the economy,” he said.
Vinod Nair, head of research at Geojit Financial Services, said that despite the RBI’s and the government’s synchronised efforts to offset a slowdown in the economy, investors have taken a pessimistic view due to continued downward revision in GDP estimate and new stress in the banking system.
Rate-sensitive banking stocks faced the heat, with the BSE Bankex, finance, auto and realty indices tanking up to 2.45 per cent. The broader BSE midcap and smallcap indices followed Sensex, shedding up to 0.94 per cent.
Rupee ends flat against US dollar
The rupee on Friday closed almost flat at 70.88 against the US dollar after the Reserve Bank of India in a widely expected move cut key interest rates by 0.25 percentage point.
At the interbank foreign exchange market, the rupee had opened strong at 70.82 against the US dollar at the interbank forex market.
During the day, the domestic unit fluctuated between a high of 70.78 and a low of 71.03. The rupee finally settled at 70.88, down 1 paise over its previous close.
On a weekly basis, the local unit slumped by 32 paise. Forex traders said markets had discounted the rate cuts.
Moreover, foreign fund outflows, heavy selling in domestic equities and rising crude oil prices also kept pressure on the Indian rupee.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.12 per cent to 98.74. Meanwhile, the 10-year government bond yield was at 6.69 per cent on Friday. (PTI)