Day after sharp gains, Sensex declines over 1% on heavy selling in RIL, Bajaj Finance

In its December 2023 policy, the US Fed had signalled that it may start cutting interest rates as early as March this year. However, on January 16, Federal Reserve System’s Governor Christopher J Waller said that interest rate cuts need to be calibrated and not rushed, which dampened the hopes of early rate cuts by the US central bank.

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A woman walks near the bronze statue of a bull outside the Bombay Stock Exchange (BSE) in Mumbai, India, Tuesday, Feb. 6, 2018. Asian markets were rattled Tuesday by the miseries on Wall Street, with Japan's Nikkei 225 index briefly dipping more than 7 percent, but investors seemed to be taking the gyrations in stride. (AP Photo/Rafiq Maqbool)

Domestic benchmark stock markets tanked around 1 per cent on Tuesday amid caution ahead of the interim Budget announcement and the US Federal Reserve monetary policy outcome.

The BSE Sensex lost 801.67 points, or 1.11 per cent, to close at 71,139.9 points and the NSE Nifty 50 ended 215.5 points (0.99 per cent) down at 21,522.1.
The fall in the indices came a day after they rose by 1.8 per cent each led by a 6.86 per cent surge in the Reliance Industries shares. On Tuesday, the equity market witnessed profit booking at higher levels.

Among the Sensex firms, Bajaj Finance fell by 5.03 per cent after its third quarter earnings failed to encourage investors. Titan, UltraTech Cement, Bajaj Finserv, Reliance Industries, ITC and NTPC were among the major firms that witnessed a sell-off.

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“Investors exhibited a reversal in strategy, adopting a cautious approach in anticipation of the upcoming FOMC (Federal Open Market Committee) meeting and interim Budget amid persistent concerns regarding elevated valuations and escalating tensions in the Middle East,” said Vinod Nair, Head of Research, Geojit Financial Services.

Analysts expect the US Fed to keep the interest rates unchanged in the policy, which will be announced on January 31, but said comments on the direction on further rate cuts will be closely monitored.

In its December 2023 policy, the US Fed had signalled that it may start cutting interest rates as early as March this year. However, on January 16, Federal Reserve System’s Governor Christopher J Waller said that interest rate cuts need to be calibrated and not rushed, which dampened the hopes of early rate cuts by the US central bank.

According to Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, selling intensified towards the fag end of the closing bell as investors further slashed their positions in key stocks ahead of the Budget, while weakness in several Asian indices also contributed to the overall fall. “With just one day left for the Budget, investors want to play it safe although there would not be any big-bang announcement by the government in this budget,” Tapse added.

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Yes Securities in a note said the policy intent in the interim Budget on February 1 is likely to be made clear through the selective allocation of resources and thrust towards rural development, employment generation, and capacity building through infrastructure development, “The critical intent of this Budget will be to signal a consolidation towards achieving the promised 4.5 per cent GFD (gross fiscal deficit) by FY26. Thus, the government will have to do a tightrope walk in allocating resources for capital expenditure, the incremental pace of which can reduce,” it said.

On Tuesday, the majority of the sectors ended in the red but buying was witnessed in public sector banks due to healthy third-quarter results.