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RBI policy fails to impress market; Sensex falls 250 pts, Nifty below 10,800

NEW DELHI: RBI’s policy decision to hold the repo rate at 6.5% in its fifth bi-monthly policy review failed to uplift investor sentiment, which was already subdued given the fall in global stocks.

The central bank maintained its ‘calibrated tightening’ stance although it cut its inflation projection for H2FY19 to 2.7-3.2 per cent from 3.9-4.5 per cent earlier. However, RBI said there were several uncertainties that can still cloud the inflation outlook.

The BSE benchmark Sensex closed 249.90 points or 0.69 per cent lower at 35,884.41 with only six constituents in the green. The worst performing Sensex stock Sun Pharma plunged to its five-year low on Wednesday and ended 6.59 per cent lower at Rs 413.60.

It was followed by Tata Steel, Vedanta, Tata Motors, M&M and Coal India. These scrips declined between 4.27 per cent to 2.85 per cent.

HUL, HDFC, HDFC Bank, Wipro and Reliance Industries formed the other end of the spectrum, with gains of up to 2.07 per cent.

NSE benchmark Nifty settled the day at 10,784.95, down 84.55 points or 0.74 per cent. The advance-decline ratio of the 50-share index stood at 1:4.

On NSE, barring Nifty IT index all other major indices ended lower with metals, pharma and auto stocks tanking the most. The Nifty Metals inded slipped 3.68 per cent with only one constituent in the green and 14 in the red.

Rate-sensitive stocks, auto, banking and realty, extended their decline post RBI’s policy outcome. The Nifty Auto settled 2.32 per cent down, Nifty Bank 0.58 per cent down and Nifty Realty 0.61 per cent down.

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Midcap and smallcap stocks underperformed benchmark Nifty:

Factors that weighed on market today:

RBI money policy outcome
RBI’s decision to keep repo rate unchanged at 6.5 per cent didn’t do anything to improve market sentiment. Rather RBI’s ‘calibrated tightening’ stance and a hawkish inflation outlook sent domestic stocks nearly 1 per cent lower in the last hour of trade.

Even though inflation projections have been revised downwards significantly and some of the risks pointed out in the last resolution have been mitigated, especially of crude oil prices, several uncertainties still cloud the inflation outlook, the central bank said. (Also Read – Nishant’s story)

Global market fall
World stocks slipped to one-week lows on Wednesday, as declines by long-dated US bond yields and a renewal of trade concerns stoked fears of a downturn in the world’s biggest economy, the United States, Reuters reported.

The effect of Wall Street’s turmoil in the previous session, when New York-listed shares tumbled more than 3 percent, is being felt in Asia and Europe. European markets opened lower, with a pan-European index down 1.2 percent.

Weak rupee
The domestic currency slipped in today’s session against the US dollar. The rupee was trading 12 paise lower at 70.62 vs greenback at the time of writing this report. It had opened at 70.67 on Wedneday.

Expert speak

There was no expectation from the Street of any hike while lower crude prices, and appreciating INR has been discounted in the structure as of now. GDP projection in the range of 7.2% to 7.5% with lower inflation projection is positive of the investors and Street. This is culminating to be a prudent time for trending period ahead. It all now comes down to western markets and their events. We may see volatility giving the Dalal Street a short visit.

– Mustafa Nadeem, CEO, Epic Research

We expect the Indian markets to remain volatile owing to number of global/domestic events lined up in the near term. Globally, the Opec meet will be on market radar. Further, trade war concerns between US-China would be actively tracked. On the domestic front, the five state elections exit polls and actual results is likely to increase volatility. Thus, we would advise maintaining stock specific trading approach and focus more on position management
– Jayant Manglik, President, Religare Broking


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