Short-selling was high in interest rate-sensitive stocks on Tuesday, after the Reserve Bank of India (RBI) decided to keep key lending rates unchanged.
RBI only lowered banks' cash reserve ratio (CRR) by 25 basis points to 4.25 per cent. This gave traders an opportunity to short-sell some of the top banking, real estate and select auto company stocks. The benchmark Sensex of the Bombay Stock Exchange (BSE) fell 1.1 per cent or 204 points to 18,430. The S&P CNX Nifty on the National Stock Exchange was down 1.2 per cent, or 67 points, at 5,597.
The scrip of State Bank of India (SBI), the largest government-promoted bank, fell 4.4 per cent to close at Rs 2,074 on the BSE. The stock had opened at Rs 2,172 and touched an intra-day low of Rs 2,065 as traders went on a selling spree in the derivative segment. ICICI Bank, the largest private sector lender, fell 2.2 per cent to close at Rs 1,044. The share had opened at Rs 1,071 on the BSE. The BSE banking index slipped 1.4 per cent.
The share price of HDFC and HDFC Bank fell 0.9 per cent to Rs 749 and one per cent to Rs 633, respectively.
Today's market behaviour is a knee-jerk reaction to RBI's action of no rate cut, said Kishor Ostwal, managing director of CNI Global Research. "RBI has already hinted at a cut in rates in December, which will augur well for a market rally. The Nifty has tested important support at 5,620 and now we can see 5,700 very soon," he felt.
Among automobile company stocks, Tata Motors' fell the most, 3.5 per cent, to close at Rs 247. Hero MotoCorp fell 1.8 per cent to close at Rs 1,871. Bajaj Auto was down 0.5 per cent at Rs 1,797. The BSE Automobile index was down 1.4 per cent.
The BSE Realty Index was the top loser among its sectoral indices, down 2.3 per cent. Prestige Estate fell nearly five per cent to close at Rs 148.9. HDIL was down 4.9 per cent at Rs 92.95. DB Realty fell 3.7 per cent to Rs 93.3 and DLF was down 2.2 per cent to Rs 199.
Dinesh Thakkar, chairman and managing director of Mumbai-based Angel Broking, said: "Markets are likely to be (only) slightly disappointed, since they were largely factoring in a reduction in CRR. The Reserve Bank has delivered on those lines, so there are no positive surprises. By maintaining the repo rate, the Reserve Bank has reiterated its stance on inflation management, since upside risks to inflation continue to persist. I believe that high food prices, the pass-through effect of fuel price hikes and sticky core inflation are likely to keep inflation elevated until December and I maintain our expectation of a 25-50 basis points rate cut towards the end of the fiscal year."